Hi,

I'm considering moving to the US to work, most likely on an E3 visa as I'm Australian.

I have an investment property in Australia, and the interest payments on the mortgage, and general operating costs, are higher than the rental income.

I was reading that I can claim deductions of up to $25,000 worth of loss from rental investments against my salary, which would help reduce my tax burden considerably.

My general plan for investing is to keep purchasing additional properties as I have the cash available. So in a few years the rent will go up in my existing investment property, and it will start to generate a positive cash flow (ie. Rent > interest + expenses). At this point I'll have the money to buy a second investment property.

As a result at all times my portfolio as a whole will be losing money, even though the properties I bought earlier are actually making money.

Someone said that since the portfolio as a whole continually loses money, that the IRS may make trouble. Clearly the properties are going up in value (capital gains), so I'm not truly losing money, but rather I'm deferring paying taxes until the point where I sell the investment properties (at retirement in 20 years or so). At that point I'll pay capital gains tax on my profits.

Now I'm wondering is this a legitimate and legal approach to use as far as tax and the IRS is concerned?

Also, I'd also like to purchase a property to live in while I'm in the US to claim further deductions against my salary. Are there any issues I need to be aware of buying property if I'm on an E3 visa?

Thanks!

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Originally Posted by cendrillon

Hi,

I'm considering moving to the US to work, most likely on an E3 visa as I'm Australian.

I have an investment property in Australia, and the interest payments on the mortgage, and general operating costs, are higher than the rental income.

I was reading that I can claim deductions of up to $25,000 worth of loss from rental investments against my salary, which would help reduce my tax burden considerably.

My general plan for investing is to keep purchasing additional properties as I have the cash available. So in a few years the rent will go up in my existing investment property, and it will start to generate a positive cash flow (ie. rent > interest + expenses). At this point I'll have the money to buy a second investment property.

As a result at all times my portfolio as a whole will be losing money, even though the properties I bought earlier are actually making money.

Someone said that since the portfolio as a whole continually loses money, that the IRS may make trouble. Clearly the properties are going up in value (capital gains), so I'm not truly losing money, but rather I'm deferring paying taxes until the point where I sell the investment properties (at retirement in 20 years or so). At that point I'll pay capital gains tax on my profits.

Now I'm wondering is this a legitimate and legal approach to use as far as tax and the IRS is concerned?

Also, I'd also like to purchase a property to live in while I'm in the US to claim further deductions against my salary. Are there any issues I need to be aware of buying property if I'm on an E3 visa?

Thanks!

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The $25,000 write off in the US is not as straightforward as you think. There is a limit, based on your AGI. You must also actively participate in the management of the property.

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Originally Posted by The Texas Tax Expert

The $25,000 write off in the US is not as straightforward as you think. There is a limit, based on your AGI. You must also actively participate in the management of the property.

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Hi Texas,

I'm aware of the AGI limit, I wanted to keep the example simple, but Indeed I'll only be eligible for $13,000 worth of write off. I will be an active participant in the management of the property. Nevertheless, someone told me that if I consistently claim a loss of $13,000 over a long period (on a portfolio of property), that the IRS may not like it.

Any ideas?

Thanks!

Your approach is perfectly legitimate and is being followed by LOTS of U.S. citizens.

By TTE's point is valid; it is NOT a simple process tax-wise.

Strongly recommend you seek the advice of a tax professional who has dealt with rental properties as part of his/her tax practice.