If your activities qualify as an investor and not as a business owner, you may lose the ability to claim the tax deductions listed below.
Our clients who have crossed the line into investor activities typically do so when they are:
- Investing in mortgage notes passively
- Investing as an LP in real estate syndications
- Have a small portfolio of rental units that is leased out and doesn’t require much time to manage
- Owns triple net lease properties
- Buys and holds land for future sale
The tax deductions you will lose if your activities qualify as an investor rather than business owner are as follows:
- Passive losses from real estate – investors can only deduct $3,000 per year in capital losses
- Home office deduction – investors cannot deduct their home office because they are not engaged in a trade or business
- Start-up costs
- Section 179 expensing
- Conventions and seminars
In order to deduct the above expenses, you must be engaged in business for a profit motive. See this LINK for an article detailing how you can do that.
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