hi lee phillips here i'm an attorney and i dabble  in taxes so let's talk about tax for a minute how  
hi lee phillips here i'm an attorney and i dabble  in taxes so let's talk about tax for a minute how  

is rental income taxed well you can get rental  income from the standard uh rent the place that  
is rental income taxed well you can get rental  income from the standard uh rent the place that  

the guy lives in you can get rental income from  renting equipment in your business and stuff  
the guy lives in you can get rental income from  renting equipment in your business and stuff  

so what type of rental income do you have it's  generally passive that means you can't uh if it's  
so what type of rental income do you have it's  generally passive that means you can't uh if it's  

a profit you claim it as a as a profit and it goes  against your income if there's a loss and real  
a profit you claim it as a as a profit and it goes  against your income if there's a loss and real  

estate investors often have a loss even even some  equipment rental stuff because you're depreciating  
estate investors often have a loss even even some  equipment rental stuff because you're depreciating  

the rental property or you're depreciating the  piece of equipment and it's generating a deduction  
the rental property or you're depreciating the  piece of equipment and it's generating a deduction  

and that may be more than your rental income if  it is more than your rental income then you have a  
and that may be more than your rental income if  it is more than your rental income then you have a  

loss and that's a passive loss that loss cannot be  taken over and offset against your ordinary income  
loss and that's a passive loss that loss cannot be  taken over and offset against your ordinary income  

or your non-passive income your w-2 that sort  of thing so we have to keep our passive income  
or your non-passive income your w-2 that sort  of thing so we have to keep our passive income  

and our passive losses over here separate from  our standard our ordinary income our non-passive  
and our passive losses over here separate from  our standard our ordinary income our non-passive  

income whatever you want to call this okay so  we've got our passive income in the form of  
income whatever you want to call this okay so  we've got our passive income in the form of  

rents and rents are always going  to be passive income basically  
rents and rents are always going  to be passive income basically  

if there's a loss the loss is going to be  passive and it can only be used to offset passive  
if there's a loss the loss is going to be  passive and it can only be used to offset passive  

income except there are a couple of ways  that we can take our standard real estate
income except there are a couple of ways  that we can take our standard real estate

rents and losses the depreciation all this  stuff over here and move it over to where we  
rents and losses the depreciation all this  stuff over here and move it over to where we  

can actually offset it against our w-2 income  our ordinary income those two ways are one  
can actually offset it against our w-2 income  our ordinary income those two ways are one  

you become a real estate professional in the  old days prior to 1986 we could take all of our  
you become a real estate professional in the  old days prior to 1986 we could take all of our  

passive losses generated through depreciation  and offset against our rents if we had the  
passive losses generated through depreciation  and offset against our rents if we had the  

loss we could automatically take it  over and offset our ordinary income  
loss we could automatically take it  over and offset our ordinary income  

and the bigwigs in california and places  that were making a fortune on their w-2s  
and the bigwigs in california and places  that were making a fortune on their w-2s  

were going out and paying a fortune for real  estate they didn't care what the real estate cost  
were going out and paying a fortune for real  estate they didn't care what the real estate cost  

because they used the depreciation  to offset their regular w-2 income  
because they used the depreciation  to offset their regular w-2 income  

and so in 1986 the congress finally said no no no  time out time out time out can't do this passive  
and so in 1986 the congress finally said no no no  time out time out time out can't do this passive  

stays over here in passive active over here  in non-passive active areas but if i'm a real  
stays over here in passive active over here  in non-passive active areas but if i'm a real  

estate professional and there are a lot of rules  as to how you become a real estate professional  
estate professional and there are a lot of rules  as to how you become a real estate professional  

when the 1986 law passed basically what happened  is the real estate lobby went to congress and said  
when the 1986 law passed basically what happened  is the real estate lobby went to congress and said  

hey wait a minute wait a minute we do real estate  this is our business we should be able to claim  
hey wait a minute wait a minute we do real estate  this is our business we should be able to claim  

the depreciation we should be able to claim  the expenses and everything else against our  
the depreciation we should be able to claim  the expenses and everything else against our  

ordinary income because it is our  ordinary income it's our business  
ordinary income because it is our  ordinary income it's our business  

and congress said yeah okay so if you qualify as  a real estate professional then suddenly your real  
and congress said yeah okay so if you qualify as  a real estate professional then suddenly your real  

estate depreciation and losses and everything  can be offset against your ordinary income  
estate depreciation and losses and everything  can be offset against your ordinary income  

the other way that you can do that is  with short-term rentals this airbnb stuff  
the other way that you can do that is  with short-term rentals this airbnb stuff  

that's coming up that everybody's cashing  in on these days that is not considered a  
that's coming up that everybody's cashing  in on these days that is not considered a  

real estate investment that's considered a  business now there are a lot of rules associated  
real estate investment that's considered a  business now there are a lot of rules associated  

with how you qualify for a short-term rental only  average stay under seven days you can't use it  
with how you qualify for a short-term rental only  average stay under seven days you can't use it  

for yourself more than fourteen all of these these  rules but if you follow the rules then any income  
for yourself more than fourteen all of these these  rules but if you follow the rules then any income  

and any losses any depreciation any expenses  that you have in your short-term rental are not  
and any losses any depreciation any expenses  that you have in your short-term rental are not  

considered passive they're considered business and  that's non-passive standard ordinary income and  
considered passive they're considered business and  that's non-passive standard ordinary income and  

deductions and everything else so people are  doing these short term rentals in order to  
deductions and everything else so people are  doing these short term rentals in order to  

get the depreciation the tax benefits of real  estate and real estate is a tax shelter guys  
get the depreciation the tax benefits of real  estate and real estate is a tax shelter guys  

it's one of your big tax shelters but your  accountant's never brought you in put his arm  
it's one of your big tax shelters but your  accountant's never brought you in put his arm  

around you said you know we need to teach you  how to use your real estate as a tax shelter  
around you said you know we need to teach you  how to use your real estate as a tax shelter  

they don't do that but you need to learn  to use the real estate as a tax shelter  
they don't do that but you need to learn  to use the real estate as a tax shelter  

and you get the benefits of real estate in the  tax shelter aspect but if it's short-term rental  
and you get the benefits of real estate in the  tax shelter aspect but if it's short-term rental  

that goes against your ordinary  income your w-2 stuff so real estate  
that goes against your ordinary  income your w-2 stuff so real estate  

rental stuff equipment rental stuff all passive  depreciation passive everything passive unless  
rental stuff equipment rental stuff all passive  depreciation passive everything passive unless  

you qualify as the real estate professional  or it's a short-term rental then it comes over  
you qualify as the real estate professional  or it's a short-term rental then it comes over  

into the standard income ordinary income bracket  so this is lee phillips i'm just talking about  
into the standard income ordinary income bracket  so this is lee phillips i'm just talking about  

how you get your real estate or your rental income  how it's taxed what you can do with it now don't  
how you get your real estate or your rental income  how it's taxed what you can do with it now don't  

forget to subscribe to us because we keep putting  out new ones of these and press the buttons below  
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and like us and love us and all of that sort  of garbage and by the way we are talking taxes  
and like us and love us and all of that sort  of garbage and by the way we are talking taxes  

don't forget to sign up for my 10 tax tips because  our ultimate goal is to save you 20 on your taxes  
don't forget to sign up for my 10 tax tips because  our ultimate goal is to save you 20 on your taxes  

and i think we can do that we'll teach you  how to use your real estate as a tax shelter  
and i think we can do that we'll teach you  how to use your real estate as a tax shelter  

so and your other tax shelter you know what it is  it's your little business you need to learn your  
so and your other tax shelter you know what it is  it's your little business you need to learn your  

to use your little business as  a tax shelter too lee phillips  
to use your little business as  a tax shelter too lee phillips  

we'll keep talking about taxes and legal stuff and  asset protection and all the rest of this stuff
we'll keep talking about taxes and legal stuff and  asset protection and all the rest of this stuff