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How much in real estate expenses can I write off on my taxes every year? Part 2


Q: How much in real estate expenses can I write off on my taxes every year? Part 2 (The 4 types of real estate investor definitions/classifications that the IRS has)
-Pete, Caldwell, NJ

A: In our last installment, Pete from Caldwell, NJ asked how much in real estate expenses could he write off every year and I said that he could write off as little as up to $25,000 and as much as however large his real estate loss is depending on his IRS classification—this is because the amount of real estate expenses that Pete can write off every depends in part on how the IRS categorizes him and his real estate activities. What I’m going to give you now are the 4 types of real estate investor classifications that the IRS has: 1) Real Estate Investor, 2) Real Estate Dealer, 3) Real Estate Professional, 4)Real Estate Developer. For tax purposes, real estate professional is the most ideal classification because there are no limits on the losses you can take against your income. To figure out how the IRS would classify your real estate activities, you need to do is some research or consult a CPA who specializes in real estate. Again, thanks for your question, Pete. Good luck. For more real estate tips and information, visit performanceproperty.com. I’m Gerald Lucas and I’ll see you again soon.

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