If a taxpayers income is too high to claim rental real estate losses and the taxpayer doesnt qualify as a real estate professional, the taxpayer can buy passive income generators such as, oil and gas venture, equipment leasing, or real estate limited partnerships to utilize the real estate losses.
Specific Details
The parents reduced their taxable income by $5,000 by buying passive income generators to utilize their real estate losses. Since the parents income was taxed at the 30% tax bracket, the income reduction may decrease their income taxes by $1,500 ($5,000 x 30%).
Potential Savings
If you are in a combined (federal, self-employment, and state) tax bracket of 30%, you could reduce your taxes up to $300 for every $1,000 of income reduction by buying passive income generators to utilize the real estate losses.