High income investors face limits claiming passive rental property losses if income exceeds $150k. But losses are allowed against active income sources like short-term rentals.
So consider making a new rental property purchase a short-term rental in year one to generate deductible active losses, even if long-term is the goal.
Also do a cost segregation study in year one to maximize depreciation write-offs on renovations upfront.
The combination provides substantial deductions to offset other income that year. Then convert to traditional long-term rental in future years.
It jumpstarts tax reduction potential in the first year while still achieving the target passive investment purpose subsequently. Requires upfront planning for maximum benefit.
