You don’t need to materially participate to take the 100% IDC deduction in year one - the election to expense vs. amortize is available either way. The difference is how the loss is treated: if you’re not a material participant, the IDC deduction is considered a passive loss, so it can only offset passive income (or carry forward until you have passive income or dispose of the investment). If you are a GP or otherwise materially participate, it can offset active/W2 income, which is where the real power is for high earners.
So yes, the deduction is there no matter what—but whether it lowers your tax bill today or just builds a carryforward depends on your role in the partnership. That’s why choosing the right structure and operator is key. Platforms like Fieldvest help high earners by matching them with vetted operators and projects structured to maximize the deduction in a way that actually works in practice.
