How to Use Rental Losses to OFFSET W2 Taxes! [Part 1]

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Certified Enrolled Agent Karlton Dennis has seen everything in the game, using his knowledge to take advantage of his tax-return every year to write-off some quite luxurious items. The thing is, ANYBODY can do this! How? Find out on today's Taxes Made Simple!
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*Disclaimer: I am not a financial advisor nor am I an attorney. This information is for entertainment purposes only. It is highly recommended that you speak with a tax professional or tax attorney before performing any of the strategies mentioned in this video. Thank you.
#taxes #taxfreeliving #taxexpert #taxreduction #llc

[@ElliottJMiller]

One of the best moves I ever made in my life. Filed taxes this year and was amazed. I’m hooked. Thank you KD. I looked at an in-depth older video of yours end of last year or beginning of this year about this same topic. And an older video on the tax savings on the different business structures. The laws of the universe and attraction are making my goals inevitable.

[@hipzwhitetower7413]

does looking for a property count towards the 750 hours needed to offset taxes on your w2/1099 before buying the rental property??

[@HisStolenIdentity]

I ❤ the way you teach! Specifically, you break the tax laws down for easy assimilation. You also provide overviews and takeaways of the video. Thanks Karlton!

[@dannykalman]

WOW what an education. I’m sold. THANK YOU for your service. I had been wondering for years how to actually use real estate properly for offsetting taxes. Nobody had ever explained or even mentioned any of these topics to me. Wouldn’t have even known what to ask Google. Planning to do this immediately. Thank you!

[@s_hazard]

Been studying the topic of using depreciation in real estate to offset taxes and I was thrown a curveball when I came across the term “real estate professional”. This video came right on time and as always, you do such a great job explaining. I do however, find it hard to believe that the “wealthy” are spending 750 hours a year in real estate or own majority of their real estate in short-term rentals… I could be wrong.

[@karltondennis]

Glad I could help. Look forward to sharping your understanding during the Tax Free Wealth Event !

[@wandapeguero7162]

​@@karltondennis​@karltondennisofficial I love love your content. Can I qualify as a real estate professional status if I'm real estate agent?

[@hipzwhitetower7413]

@@karltondennis does looking for a property count towards the 750 hours needed to offset taxes on your w2/1099 before buying the rental property??

[@cmargo10]

@@karltondennisI'm treasurer on a board of directors of a 400 plus townhome community. So I eat and breathe property management as fulfilling my duty as an almost full time volunteer. Would this qualify me as a real estate professional? Bcuz that would be very helpful in my tax life. Great video!!

[@dantawright1686]

Great wealth of knowledge. Your explanation skills of this knowledge are on point. Bought an old home in MD for $235k, received 4 lots on one deed with their own tax base. I rebuilt the original home with $200k construction loan and $130k in credit cards. I lived on lot #2 until the rebuild was done and renovated lot #2 as well. Now, I rent lot #2 but it came as one of the gifted lots. I build a work space on the back side of the rebuild to work from. The other two lots are .5 per acre land. I am a self-employed person working from a dedicated space of my home. I did not know I could depreciate my work space (34.23 %) of home. 2021, rented a section of rebuild home (10%) to a friend after closing down my business for six months. trying to understand cost basis to apply depreciation to my home, business and how to file 3115 form for lot #2, I dropped depreciation 1.5 years I had no tenant??

[@nathanaelmccasland2349]

Hey bud, your videos are money!!!!!🎉🎉 Thank you for all the value. Tell your team to keep up the good work for me. You guys are killing this space. Can't wait for the end of the month challenge. Stay blessed.

[@xclservices]

Karlton, thank you for taking the time to make this video and share valuable information. It took me some additional research and study to fully comprehend the rule to the point of confidently sharing this with my clients and give them assurance that, if they meet the requirements, the losses could be legitimately claimed. Thanks again.

[@roadtoscratchgolf3481]

Karlton, as I understand you, since I am an early retiree who owns rental property, I can claim active rental losses on other income such as pension, social security and the sale of other real estate? Plus, I use my spouse, who is a lawyer to manage the property as well as pay her a monthly legal retainer. Am I going in the right direction? Thanks.

[@64DCPG]

Game changing knowledge for me! Now I have to watch all the other videos.

[@ryanwilliams989]

The utilization of after-tax money and tax-free growth makes opening a Roth IRA very advantageous. Through a careful guidance of my FA, I did not pay taxes on my withdrawals of $2.86 million when I retired.

[@StellaMaris-lv2uq]

I don't regret the numerous financial mistakes I've made in the past since I've learnt from them. But the biggest one was planning my finances without consulting with a licensed financial counsel.

[@maryHenokNft]

Indeed, I did make use of a financial counselor. As I get closer to retirement, their advice has been really helpful. I thought compound interest on index funds wouldn't be sufficient because I started late. It's amusing how I've done better than colleagues who have more years of investment experience. I've profited more than $886k tax free.

[@maggysterling33254]

@@maryHenokNft I appreciate the implementation of ideas and strategies that result to unmeasurable progress. Being heavily liquid, I'd rather not reinvent the wheel, thus the search for a reputable advisor, mind sharing info of this person guiding you please?

[@maryHenokNft]

She's known as *Gertrude Margaret Quinto* One of the finest portfolio managers in the field. She's widely recognized; you should take a look at her work.

[@BiancaSherly-qt6sb]

Thanks for the advice. The search for your coach was simple. I investigated her well before using her services. Considering her résumé, she appears competent.

[@realrajiv]

Really, the video starts at 12:30

[@StoneSpirit7]

One thing I haven’t found much about is if your saving up with a friend and want to invest together how could that all work?!

[@jas2dn229]

Thank you Karlton! I was beginning to look into selling one of my properties where I currently have long-term rentals. However, I am now reevaluating.

[@videosabia]

Hi, you’re so right; setting up the rental investment right - from a tax angle - at the beginning is key. Just subed!

[@pbdmd3688]

Thank you KD amazing content! While researching about LLC for my 4 rental props your channel showed up. I’m hooked so much I’m learning here my CPA doesn’t even tell.

[@sharitaharvey4962]

I love this video

[@peterchirico2153]

Karlton I wanted to ask if you do tax returns ? Thanks for all your good information.

[@karltondennis]

Yes. Link in description to book a call

[@bashar9200]

Thank you Karlton!! I am truly fan of your work. keep it going!

[@ryanoquinn1068]

One of the best explanations of this subject I’ve ever heard. Thanks!

[@robertwalker8716]

To show time in the real estate operations. Can you just open a property management company, hire your own company to manage your business and be your own employee.

[@robertwalker8716]

Lol ypu answered it in the video like a minute after I asked

[@bboyrygis]

When you go onto these websites like Zillow, ECT. I can not find the entire tax history report. I only see the property tax and tax assessment.

[@stuboo]

Thanks. Would love to see a video discussing how the sale of a property might allow carryover PALs to offset W2 income.

[@joshualewandowski3493]

Great video. I have owned a short term rental for about 2 years that have taken a loss each year; however I have been told my w2 income is too high to qualify for those losses. Is that accurate?

[@scorpion55x]

Hey Karlton - if you have a spouse that doesn’t work, can they claim real estate professional status and then file jointly and use their real estate professional status to use passive losses to offset active income?

[@ksirussa]

Yes! Definitely

[@trentalexander2413]

Stellar presentation along with FACTS makes this a keeper!

[@jerowm5568]

Absolutely amazing video! 🙌🏽 very thorough explanation of the different avenues to utilize this strategy. Fantastic job 👍🏽

[@jeffreysimeon4161]

This is literally the video that made me follow you… 💪🏽 really appreciate all this information. I look forward to implementing all the strategic tools to my real estate venture. Thanks

[@ifeanyichukwuonukogu6125]

Amazing videos and I have always been a big fan. Wondering if you can do a video on using non profits for write offs and does it provide W2 benefits?

[@MounjarojourneywithPam]

thank you for this video. I’ve just been studying about this and hoping to have enough courage to start this type of invesment

[@chendricks850]

Hey, this is an awesome video!!! I really appreciate your style of teaching. I’m going digging in your channel after I finish this series…

[@kasiwilliams5927]

Amazing content very detailed in explaining the loopholes for rentals.

[@kavemanbites]

great channel man. you have a new viewer. thanks for sharing your knowledge.

[@GautamAtri]

Someone finally made this video. Fantastic work

[@kimwieczorek1879]

We do Airbnb(rent out 1 of our bedrooms. Been doing it for 2.5 yrs. and luv it). But what are all the tax write offs we can use when we do our taxes in Feb.?? Tytyty❤

[@Raf.Velasco]

Always spitting gems 💎🔥🤙🏼

[@user-oj1jz6gg6j]

I've seen a lot of different videos addressing these topics but yours is truly the best! Thank you sir you have a gift :)

[@leebeavers6912]

Thank you so much! First real estate video I have seen that, not only explains the terms being thrown around but, the actual strategies and the rationale for them.

[@jjmmanagement4909]

So if I sell the home in 5 years. And they do bonus depreciation recapture, do they just take back all the money I saved on taxes? Wouldn't that just be a wash?

[@theculturedev]

Excellent work brother 👊 I’ve led multiple people through this same logic path. Blows their minds 🤯

[@ArtEscutia]

KD does the STR property have to be in the United States in order to take advantage of these strategies? Or can the property be in another country?

[@karltondennis]

Needs to be US based to use the cost segregation strategy

[@BO1980ful]

Thank you for your video. However, what happens when the property is older than 27 years? Can’t use depression

[@lurch415]

Good question what happened ?

[@airdoc97]

Thank you KD .....very informative and clear. You wouldn't to have any colleagues in Orlando Florida? To help me on my taxes and maximize my losses as this is my 1st investment home that I have a long term tenant in now?

[@luisarevalo8394]

So if you buy land and develop it that requires time and resources do build plus it’s only land value so you can claim depreciation on new property? Does this new property then have to be a short term rental property to offset other rental income. And put all properties under one company a managing company? What makes that business a managing company besides managing the rents/landlord duties?

[@WillJohnsonSD_Inspector]

Awesome. Jammed-packed information. I actually stop all my multitasking to focus. Saved to research. Subscribed and liked

[@kristonmyers4365]

Thank you for this video very helpful!! QUESTION! My tax professional is stating if I put my current rental property (which was my primary residence and I moved out of it to make it a rental) into an LLC and do a schedule C with him when filing I will be able to write off all of my depreciation and losses etc and deduct that from my W2? Is this correct or is he misinformed? He said the reason I cannot deduct it from my W2 currently is because it’s not in a LLC… just want others thoughts.

[@SuperGreatSphinx]

Could you do a video on how to actually fill out a Massachusetts state income tax return?

[@karltondennis]

My Tax software does all of the work for me. This isn’t worth your time in my opinion. Tax filing should be outsourced

[@FlipCouvillion]

After the insurance is paid I might bring home $100-$200 per house every month. That is if everyone pays and nothing breaks.

[@DrJeffreyGarofalo]

It is 20-30% of the building value on homes and apartments but 100% on shopping centers or business commercial buildings.

[@NickyP1]

So essentially if it's not a short term rental, and youre just renting to a tenant for 12-13 month lease agreements, the only benefit to a rental would be the cash flow from the tenant and a person wouldnt be able to take advantage of any potential losses or depreciation? Was thinking about renting somewhere and using my primary residence as a rental, but seems like it may not be worth it?

[@missLonaPooh]

Owning property in another state seems unmanageable. I'm not flying to TX when the toilet is stopped. How do you manage the sorts?

[@beerdanay2157]

hi Karlton, I'm 20 years old. I interested in studying about taxes. I found your channel and it's very helpful (Thanks a lot}

[@Birbb2]

Hi..been watching your videos awhile now....very good contents and thanks for all the tips :) I want to ask about rental lost, if I am active w2 and have a long term rental. Can I use rental lost(cost seg, de-appreciation...etc.) to offset tax on my W2? I think I remember the max is 25k but not sure.

[@ksirussa]

Do u know answer now ?

[@LW0625]

Wow! I just came across your video, and I can say I learned so much about tax terminology and information. Thank you very much!

[@ricknightingale6446]

Question, I am a contractor and currently do mostly residential remodeling. I am getting in to the investing side. If I do the rehab work on my own long term rentals would that qualify as work on my real estate rental business as a real estate professional or not? Also, with the short term rental method, does qualifying this way allow you to take advantage of losses on long term rentals as well, or does this only help for short term rental depreciation? Thanks for the awesome content.

[@alejandrorobles1628]

Only question always heard if you file loss to pay less taxes it hurts to show for banks as a good business to be good for a loan ? So is this a good way to declare loss but still get approved for bank loans

[@jeffreyjoseph37]

It’s crazy how many Tax pros don’t know the information he put out in this video.

[@BaileyHorse]

They don’t need to know everything as most people are not investors in real estate

[@jasonso2893]

I am assuming this is how Robert Kiyosaki does it since he always goes on about not paying taxes and loving “good debt”

[@kelsyec5419]

i tried this and now i am dealing with an IRS audit ... great work

[@karltondennis]

call my office on monday. we would love to defend you against the IRS on this matter. 714-252-5822.

[@Whatever0704]

I love this channel and appreciate all the great explanations. If I do not have a W2 and spend most of my time doing real estate deals. I have a few rental properties some of them I manage myself. Some are in other states with property managers. Will I be considered a real estate professional? As I do not have a W2 income. I can use my depreciation on that. But I guess most of my rental profit will be tax free as I will have depreciation plus other costs.

[@tax-modern]

Yeah, if you don't have non-rental income to offset, then there wouldn't really be a reason to try to qualify for real estate professional status. But hours spent on your own rental properties do count towards the qualifying hours. Well, one catch is you probably can't count hours spent on short-term rentals (with an average stay of 7 days or less). Two tax court cases upheld the position that STR rentals aren't a qualified real estate activity to qualify for real estate professional status.

[@hipzwhitetower7413]

@@tax-modern does looking for a property count towards the 750 hours needed to offset taxes on your w2/1099 before buying the rental property??

[@tax-modern]

@@hipzwhitetower7413 Yes. Keep in mind 750 hours is the minimum number of hours, but also real estate work has to be your primary job, so you can't spend more hours on any other type of work.

[@hipzwhitetower7413]

@@tax-modern I live with my soon to be wife, do we have to be married to qualify as she will be putting the 750hrs?

[@tax-modern]

@@hipzwhitetower7413 If you want to be able to use her status to help reduce your taxable income, yes.

[@billanderson5165]

Informative video. One thing I noticed missing was the cap on real estate losses. You are only allowed 25k in loss if you make under 100k w2 income. I’ve lost 20k in write offs 4 years straight. How can I get around this cap

[@AINEWMUSICANDBOOKSBYMB]

Truly fantastic wisdom! How can I hire you as my tax strategist? I’m serious ASAP!

[@karltondennis]

Join The Tax Free Wealth Challenge, this is the ONLY way to work with me directly

[@jlaudamusic5190]

Yes, but how many weeks a year does the property have to be rented for? What if it is a seasonal property?

[@LuG8911]

Isnt this only the case if you make under 150k/year?

[@probst9999999999]

OK so in a place with 92% building value you can potentially actually get more year 1 depreciation than the 20% down payment is that right? I have a high W2 with ~45% tax rate and my wife is doing RE agent classes so it seems like once she can qualify as an RE professional it would potentially be possible for me to spend X on RE and in the perfect case maybe get as much as 0.75X back from taxes that year if you do manage 30% first year depreciation on a 92% building value property.

[@JacoboMendoza-s1r]

This is a phenomenal video. It all finally makes send to me. I was perceiving this the wrong way.

[@addowner]

Also, thank you so much for all this information. Learning a lot from you.

[@yourstrulybostonyourstruly3185]

Just dropping comments for the algo King, I definitely need to cop one of your programs though. I’ve been a stock guy for the longest, but I’m ready to throw my hat in the real estate ring 💪🏾

[@JustSouthFloridaLiving]

One of your best, most informative and helpful videos keep them coming

[@EEEE33333]

did you ever make the video on creating a management company for dealing with our personal rentals? Any recommendations on finding a cpa that does Cost Segregation study?

[@hassanzorome7497]

I just subscribed I hope you can make a video about cost segregation depreciation.

[@LyRiCss718]

Thank you. This was extremely informative.

[@giraldoint]

My accountant is telling me that if I'm earning over 250k per year, I can no longer offset my taxes with rental real estate losses. Is that right? If so, what else can I do? Thank you

[@tillaroach9330]

Unfortunately, that’s correct.

[@anon3009]

Question: If I qualify as a RE professional & have a short-term rental that I use personally from time to time is there a limit on how many days I may use it for personal use and still take a passive loss via depreciation on that property?

[@2L8CO]

You are Awesome my friend. Period. Peace.

[@alexmoralessmith385]

Hey karlton I AM SUPER INTERESTED in knowing more about this and working with you, could this be applied as a W2 employee working in the US but buying an either short-term /long-term rental property abroad? Let me know, im down to have an tax planning session with you

[@MikeHawk-zh3yl]

Bro great information, opened my eyes in soo many ways on why we need real estate

[@RoniLA310]

Great explanation. I'm wondering though, by changing STR income to active, you will then have to move it from a Schedule E to a Schedule C and pay more taxes, SS and medi. So, is it really advantages to offset on one end by adding to the other?

[@evanagor8404]

@kartltondennisoffical Can you elaborate on this please?

[@tax-modern]

Even when an STR's income qualifies to be considered non-passive income, it still goes on Schedule E and you still don't have to pay SS or Medicare tax on that income. The difference in how it is taxed actually is how the income is handled on form 8582. Most professional tax software has a "non-passive" option that you can select to make it use that different tax treatment.

[@quinntran996]

If you’re a W2 earner and your investment property is not making positive cash flow, can you write off your loss against the the W2 income? Is thete a way around this to be able to write off the loss annually?

[@gilev3230]

Hmmm I don't understand the locking and unlock explanation.I confused@ 20:52. Why is it locked ..

[@Pun1sh3rz]

Link to a video that connects the property management company while remaining within the guidelines of achieving the short term rental property depreciation realization? To rephrase, achieving the 100 hours materially participating but also pairing the property management company aspect?

[@duro123]

If my wife stays at home and does all the research for the properties we are trying to buy would that account for the 750 hours?

[@demsr619]

Hello Karlton you. Ideos are very informative. What tax benefits do I have if I locked in a tenant for a 12 month lease? This is my first rental property I purchased.

[@prophetseven728]

seems like this only works if you have a 9-5 type job. I never worked for someone like that. But I am debating on selling some of my properties. Because of Los Anegles laws and taxes. Property Tax alone has gotten insane. Renters Laws are out of control. list is getting bigger. Im think of just putting that money into stocks. I do not need much to live and I thinking it be less stressful. You still have to pay taxes on stocks. If you decide to sell for a profit or collect dividens. But Im assuming and will see with more reseach. If that truly the case.

[@learnwithjahsun]

Karlton, I just bought your tax bundle course and had a question. Can you amend past tax filing to claim depreciation on a real estate property? I'm in the processing of selling my property, but I thought I may be able to go back and claim depreciation when I owed it (for 15 years)?? Thanks

[@karltondennis]

Yes. The real question is … is it worth it? My team and I can help you determine that answer

[@tax-modern]

You can't amend returns to fix past depreciation issues other than just the last return that you filed. For depreciation issues before that, it's possible to correct some types of depreciation issues with a form 3115 change in accounting method. But that's a complicated process and not many tax professionals have experience with how to do that.

[@scottfoote3758]

Karlton, great video and well described info! Thank you. I do have a question, does the paper loss only apply to your federal income taxes or does it also reduce you Social Security payments and state tax bills? In other words, do I just get the benefit against my AGI post deduction federal taxes (or does it help offset OASDI, Medicare and state taxes as well)?

[@OhioTreasures]

So we inherited the paid off home next door and I work part time in my own cleaning painting business and husband works full time. So i have the time to invest and want to offset his w2 and my 1099. We dont want to short term. So how would I account for 750 hours?set up a management company? Going to watch that next.

[@firthbowden2281]

This video was amazing and so helpful. Stopped me from forming a lending business thinking I would be able to deduct expenses from my W2 income.. my question is: if I form a business that specializes in hard money lending and I earn passive income, can that business deduct expenses such as a vehicle that is used greater than 50% of the time for the business? Like traveling to different properties to assess if they are good investments to lend money for. Thanks!

[@douglasbasso7093]

Phenomenal stuff. Excited for part 2.

[@tiffanyagee3274]

This was very informative video. Going to check out part 2

[@floonky]

I wonder if this concept can also be used if you rent out your Second\Vacation homes partially for the year, Or is it only for Investment properties.

[@urbanrenaissanceman3913]

Can singles that make less than 150k take advantage of this tax code? Also does the property have to be labeled a rental property or can it be a personal duplex

[@addowner]

My husband and I are new to real estate investing, just one duplex so far, long-term rental. I’ve heard there’s also an amount that if we don’t make over that amount in W-2 income, we can deduct up to $25,000 of the passive losses from our W-2 income. What is that amount?

[@robertglasby8108]

Where's part 2, long term rental

[@markvaughn3315]

Great information Karlton. Thank you for sharing this with us al.

[@humangoodness]

Thank you. What if someone bought a camp ground with some short term renters. Can she use the short term rental status to claim nonpassive income to offset the W2 income?

[@ellenoir5678]

The real KD!! What's good Coach

[@mplscarsales6652]

Do you need to have a LLC to claim depreciation and get the tax benifits ? For example beginner with 1 rental property LLC fees to have a LLC takes up most your profit with only 1 rental so just regular home owners blanket insurance until I get 3-5 rental to put into a LLC sound correct ?

[@JamesGametGT]

Content is amazing love your channels!

[@asvpjoeyevdo9798]

Well explained

[@prophetseven728]

How do you find out the Land Value vs Building Value? One of my homes burned down. I wonder what it worth now. I hate to ask a realstate agent as they just want to sell it for me. Blow up the real value to get me hooked into siging paper work with them. Then coming around telling to lower the price for real value.