Tax Savings as a High-Earning Dual Income W2 Family ($300k / yr)
“Wealthy people buy real estate.” I realize I’m fortunate enough to count myself among them. These supposed tax savings though… where are they?
My wife and I are fortunate enough to have two W2 jobs making ~$150k / yr each. I only mention this number because at $150k AGI, the active investor allowance enabling one to deduct $25k in losses from active income disappears, as I understand it.
My current portfolio:
Condo (purchased in 2021 w/ 5% down)
Single Family (purchased in 2022 w/ 5% down)
Multi-family primary residence (purchased in 2023 w/ 15% down)
- Above-garage apartment and detached ADU are rented out. As well as guest room in the main house.
These properties are all personally owned and obviously highly leveraged. They basically operate at break-even. I’m fine with this, for now, as a long-term investor.
I don’t believe our current situation would enable us to qualify as Real Estate Professionals, which would result in massive deductions. Is everyone praising the tax savings of real estate qualifying for this status?
I love the leverage one can achieve with real estate, and I still love the asset class. Maybe I simply expected too much. If the answer here is simply, “You leveraged up too much and too quickly.” I can accept that. I do feel foolish for not understanding that all the deductions that real estate has to offer, could only be used against real estate income.