Without stopping depreciation, I would have a loss on this activity for the year.
To check my understanding:
1. The losses would accumulate until I can apply them against some passive gains such as rental income in the future, right?
2. I can't apply this loss against my W-2 income unless I qualify as a real estate professional (I don't).
3. I can apply it against passive investment gains, right? Although those generally have a favorable capital gains rate, so I'd wait for rental income.
Please let me know if these are correct 🙂
I don't have plans to sell this property, but rather keep renting it. I guess because of depreciation accumulating faster than income during this period, it would result in tax-free rental income until this portion of accumulated depreciation is used up. This is not a bad scenario. I think I see what you mean about recapture though if there was likelihood that I'd be selling in the near future. I would have to repay that depreciation while still having a passive loss (which depreciation contributed to) and still having to find some passive income to apply it against? Or would the loss be applicable to reduce the gain from the sale and thus not be an issue?
