Can owning 1 or 2 rental property qualify you as a real estate professional.?
I am planning to buy 2 rental properties, approximately $250,000 total. My wife and I both work full-time. Does owning 2 rental properties qualify either one of us as a real estate professional so that we could get losses on these properties as tax deductions against our personal income.? If not, what can we do about these rental losses (mainly due to depreciation on the property). Thanks in advance.
You cannot have losses due to depreciation of the property unless you sell it.
No. Owning rental properties does not make you a “real estate professional.” But claiming rental income and expenses on your taxes does not require one to be a “real estate professional.”
You report your rental income and your rental expenses (interest, taxes, repairs, utilities, depreciated property & improvements).
If your expenses are more than your income, you have a loss and it is deducted from your taxable income.
You do not have to be a real estate professional to do this, just own the properties.
http://www.irs.gov/taxtopics/tc414.html
http://www.irs.gov/businesses/small/industries/article/0,,id=98895,00.html
http://taxes.about.com/od/taxhelp/a/Schedule_E.htm
http://taxes.about.com/od/income/qt/Schedule_E.htm
I would hire a good accountant to figure out the best tax breaks that come with owning real estate.
The title of Real Estate Professional has nothing to do with owning property and getting the tax benefits.