Turn Your Real Estate Investing Losses into Cash

Why you have to invest in real estate?

Cash flow, capital appreciation, and the tax breaks. When real estate creates a cash flow and you don’t have to pay any tax on the money. There is also a paper loss created so that you can use to offset other income. 

There are three types of real estate:

Where the real estate is actually a business:

If you rent out your real estate less than a week and if you provide some services like housekeeping, then your income is considered as the ordinary income and your loss is an ordinary loss. This real estate loss can be offset to any kind of income without any kind of limitations. If your rental property is running in a loss, talk to an experienced professional to determine whether any of it could be considered a real estate business.

Where the real estate is an investment:

Yes your real estate is a business. Of course your real estate is an investment. A real estate investment is one that is not put in service.  For example, you buy a bare piece of property.  That is an investment unless you are renting it out to someone. The expenses go along with an investment must  be capitalized.

Where the real estate creates a passive loss:

If your rental property is put in a service then it is not a business, you have a passive investment.

If there is a loss, you can deduct your loss up to certain amount of your income. If your income is low then you need to detect certain amount of loss. If your income is over $150,000, you can’t take any of the loss against other income.