Skip to content
← Cultural Coins
Protector Archetype Insurance & Protection

Common Misconceptions About Real Estate Tax Deductions Revealed!

Thinking about buying a rental property to lower your taxes? Watch this quick tip first. Real estate tax strategist Bill Hampton, owner of Hampton Tax and Financial Services in the Atlanta area, explains the real estate tax deductions rule that surprises more investors than any other.

The real estate tax deductions misconception

Many high earners buy a long-term rental expecting its losses to offset their W-2 income. Sometimes they can. But the IRS limits how much, based on how much you earn. It’s called the passive loss limit, and Bill says it’s the rule that causes the most confusion.

How the passive loss limit works

  • Income of $100,000 or less: you may be able to deduct up to $25,000 in rental losses against your other income.
  • Between $100,000 and $150,000: that $25,000 allowance gradually shrinks.
  • $150,000 and up: the losses are suspended, so you can’t use them that year.

Bill notes the income limits are the same whether you file single or jointly, which can catch married couples off guard.

The good news

Suspended losses aren’t lost. They carry forward, and you can use them later, like when your income drops or when you sell the property. Bill tells clients the losses are “put in the bank” for the future.

How to plan your real estate tax deductions

Many investors only learn about this rule when they sit down to file. Talk with a tax pro who specializes in real estate before you buy, so you know what you can deduct and when. For the full conversation, including depreciation, cost segregation and passing property to your kids, read Real Estate Tax Secrets with Bill Hampton.

This article is for education only and isn’t tax advice. Tax rules change and depend on your situation, so talk with a qualified tax professional before making decisions.

Know someone who needs this?

Share with a friendFacebookLinkedIn

Your next step