Excess Business Loss Rules for Cost Seg Losses

Why Your $1M Cost Segregation Loss Only Boosts Wages by 50%: Two investors. Same $1M income. Same $1M cost seg loss. One wipes out nearly his entire tax bill the other can only use half. The difference is a rule almost nobody talks about. If you're a high earner with a W-2 and you're counting on REPS or the short-term rental loophole to erase your taxes, there's a fourth gate your loss has to clear: the Excess Business Loss limitation (Section 461(l)). In 2026, it caps how much of your real estate loss can offset your wages at $512,000 if you're married filing jointly ($256,000 single). In this video, I break down: → The 5 gates every real estate loss has to pass through before it touches your income → Exactly where the $512K cap bites and why REPS and the STR loophole don't get you past it → Why business owners get to use their full loss while W-2 earners get capped → What happens to the loss you can't use (spoiler: it's not gone, it becomes an NOL) → How to size and time your cost seg study so you're the investor who walks away uncapped My team sees this cap catch investors every single year, usually after the study's already done. Understand it before you write thecheck, not after. CHAPTERS 0:00 Introduction: The Excess Business Loss (EBL) Cap 0:27 Excess Business Lose Cap 0:58 The 5 Gates your Loss has to clear 03:38 Understanding the Excess Business Loss (EBL) Limitation (Gate 4) 05:39 Business Income vs. W2: The Key Distinction 07:55 How Capped Losses Become Net Operating Losses (NOLs) 10:41 Strategies to Manage the EBL Cap 12:13 Recap and Future Topics — I'm Sean Graham — CPA, real estate investor, and owner of Maven Cost Segregation Tax Advisors - one of the top cost segregation firms in the country. I break down the tax strategies real estate investors actually use, in plain English. New videos every week. Official Website: https://www.mavencostseg.com — This video is for educational purposes only and is not tax, legal, or financial advice. Tax rules change and every situation is different — talk to a qualified tax professional before making decisions based on this content. #CostSegregation #RealEstateTax #TaxStrategy #ExcessBusinessLoss #REPS #ShortTermRental #RealEstateInvesting