W-2 write off for Rehabbed investment property?I have rehabbed a rental property out of state, and was wondering if there are any deductions that I can take against my W-2 income, or if all deductions can only be taken

[jdoeslash]

I’m a W-2 employee in a high income tax state. I have rehabbed a rental property out of state, and am renting it out to long-term tenants. I was wondering if there are any deductions that I can take against my W-2 income, or if all deductions can only be taken against the rental property income?

[PaulaM]

In general, rental activities are considered passive so any losses offset other passive income items, but there are exceptions. With active participation (defined in IRS publication below) you maybe able to offset non passive income (W-2). Any unused losses would be carried over to later income years.

All of your rehab expenses that took place before your property was placed in service (ready and available for rent) would be capitalized as improvements and added to your basis for depreciation expenses.


Publication 527 (2023), Residential Rental Property