Attention Real Estate Investors: IRS Alert

 
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Anytime you hear investor alert you may think “oh no, not another alert” but this goes toward long term strategy for those of you who buy and sell real estate as your side job or hobby. Here’s an issue we keep seeing in cases coming out of the Tax Court:

Large rental losses taken by taxpayers claiming to be real estate pros. Real estate professionals must meet two tests to beat the passive-activity loss rules and deduct their rental losses in full. They must spend over half their working hours and more than 750 hours a year materially participating in real estate activities. IRS often has success in court when challenging real-estate pro status.

Here, a couple deducted a big rental loss. The husband had a real estate license and worked full-time as a firefighter, and the wife held down two jobs as a nurse. Neither the husband nor the wife separately put in enough hours to qualify as a real estate pro, so the write-off is axed (Whoriskey, TC Summ. Op. 2021-30). Note that the couple didn’t qualify for another exception, which allows $25,000 of rental losses to be deducted by people who actively participate in a rental activity, because their modified adjusted gross income exceeded the $150,000 phaseout limit.

Article Written By: Kevin Berju, Branch Manager AFN, www.PhillyMortgageTeam.com

American Financial Network NMLS # 137213



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Kevin Berju starts Philly Mortgage Team with over 25 years in the mortgage industry. Prior to working with residential and commercial mortgages, Kevin graduated with a business degree from Temple University, owned his own business, and worked as an agent for years in both commercial & residential Real Estate. With Kevin’s diverse knowledge of the real estate and mortgage industries, his clients are thoroughly guided throughout their home buying or refinance process. As a result of his knowledge, attention to detail, responsiveness to his clients, and exceptional work ethic, Kevin was awarded the Five Star Mortgage Professional recognition in Philadelphia Magazine for the past successive years as well as reaching the top 1% of all originators country wide since 2012 as designated by Mortgage Executive magazine.

As a mortgage professional for over 2 decades, Kevin is an invaluable resource for both first-time and experienced home buyers. With his accomplishment of the Certified Mortgage Planning Specialist designation, Kevin is placed in an elite group of the top 5% of mortgage professionals in the industry. Looking to Purchase or Refinance in Pennsylvania, New Jersey, or Florida? Kevin Berju is the Lender for You!


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