Tax Losses Deductible Against Work Income

QUESTION: I’ve heard that investors can no longer deduct mortgage interest and property taxes against their ordinary income. I’ve been deducting the tax loss on my little fourplex against my job income.

ANSWER: The federal tax rule is if your adjusted gross income is less than $100,000 you can deduct up to $25,000 of annual passive income losses, such as from your fourplex. However, if you have excess nondeductible losses you can “suspend” these losses, like a bank account, for use in future years or to apply against profits from the sale of passive income property, such as apartments.

Buying Vacant Land Is Risky

Q: What do you think of buying rural land to hold for investment profits, perhaps 10 to 15 years in the future?

A: Not much. You are speculating that the land value will increase due to some outside factor beyond your control.

The general rule is that vacant land must appreciate in market value at least 20% a year just to break even, after considering inflation, carrying costs and “lost opportunity costs” on the down payment investment.