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Just read an article yesterday about the IRS viewing all LLC losses as "passive" and can only be used to offset future LLC gains and not your regular income. This runs counter to my understanding that investment losses on rental properties saves you taxes. Can someone shed some light on this?
You should consult with a tax accountant/CPA. That being said, from my own experience, losses on rental properties can only offset gains on the same or other rentals that you own. If no gains, the loss carries forward.
I have my own professional accountant and he has advised me that I can deduct the entire real estate loss in one year. You do not have to carry over like you do with stock losses.
When I file my Schedule E, rental income/losses is considered a passive event therefore everything kicks back to your regular income.
So if you have carefully kept records (adjusted cost-basis from the time of rental) you can deduct the entire real estate loss (as a one time event) from your regular income.
I am writing off 130K real estate loss from the sale of my "investment property" I used it for my primary home for 3 years but for the last 1.5 years, it's been an "investment property" So I carefuly got an appraisal from the time I rented out the place. Got the adjusted cost basis. Filed a Schedule E.
For tax year 2009, I get a 130K tax deduction. Just trying to make the best out of a bad situation. Didn't need any government bailout to cover my losses because I was responsible with my purchases.
I have my own professional accountant and he has advised me that I can deduct the entire real estate loss in one year. You do not have to carry over like you do with stock losses.
When I file my Schedule E, rental income/losses is considered a passive event therefore everything kicks back to your regular income.
So if you have carefully kept records (adjusted cost-basis from the time of rental) you can deduct the entire real estate loss (as a one time event) from your regular income.
I am writing off 130K real estate loss from the sale of my "investment property" I used it for my primary home for 3 years but for the last 1.5 years, it's been an "investment property" So I carefuly got an appraisal from the time I rented out the place. Got the adjusted cost basis. Filed a Schedule E.
For tax year 2009, I get a 130K tax deduction. Just trying to make the best out of a bad situation. Didn't need any government bailout to cover my losses because I was responsible with my purchases.
Aneftp, I have heard information that verifies what you and your accountant have said..... but if you wouldn't mind, can you give me some more specifics about your personal transaction?
It sounds like you sold a home for a $130K loss, but did you ACTUALLY lose $130K of your own money and were "free and clear," or is this some type of short sale/deed in lieu/etc. type scenario where a deficiency was involved?
If there was a deficiency? Were you 1099'ed? Did you agree to some other settlement for the deficiency?
On another note, I have also been informed you can only deduct the entire loss in one year if the investment property is a RENTAL.... I know that's what most everyone is talking about here.... but the point is that if you had purchased a home and let it sit, hoping for appreciation alone, then sold it at a loss, it would be considered a capital loss.... and in that casee you could only deduct and then carry over $3000 annually. Therefore, you better be able to prove it's a rental or start renting it now Have I been informed correctly?
Volk2k, I had assumed you were only discussing rental/LLC losses due to lost rental income, or income not keeping up with expenses. Sale of a rental at a loss as aneftp describes is a different situation.
Volk2k, I had assumed you were only discussing rental/LLC losses due to lost rental income, or income not keeping up with expenses. Sale of a rental at a loss as aneftp describes is a different situation.
Hehe.... I'm not even sure which scenario the OP is referring to because it sounds like he/she could be talking about either one?
But even if he/she isn't talking about a sale at a loss, I'd still be interested in finding out the details of aneftp's scenario.
Aneftp, I have heard information that verifies what you and your accountant have said..... but if you wouldn't mind, can you give me some more specifics about your personal transaction?
It sounds like you sold a home for a $130K loss, but did you ACTUALLY lose $130K of your own money and were "free and clear," or is this some type of short sale/deed in lieu/etc. type scenario where a deficiency was involved?
If there was a deficiency? Were you 1099'ed? Did you agree to some other settlement for the deficiency?
On another note, I have also been informed you can only deduct the entire loss in one year if the investment property is a RENTAL.... I know that's what most everyone is talking about here.... but the point is that if you had purchased a home and let it sit, hoping for appreciation alone, then sold it at a loss, it would be considered a capital loss.... and in that casee you could only deduct and then carry over $3000 annually. Therefore, you better be able to prove it's a rental or start renting it now Have I been informed correctly?
Thanks in advance!
I suffered a realized loss of 130K on the sale of the rental home. Yes, as painful as it sounds, all my hard earned money going down the drain. I did not need any government or bank to bail me out. I am losing 100K in principal payments plus 30K in real estate commissions.
You cannot deduct a loss if it's a "short sale or foreclosure" because that's not a real loss. The only one taking the loss is the bank. If more people acted responsiblity (big downpayments, actually paying into the principal), we wouldn't need short sales or foreclosure (unless they suffered a big job loss, divorce, medical illness). It's sad these days that we see millions of short sales and foreclosures because people aren't responsible with their finances.
What do you mean, you just let the home "sit" and wait for appreciation. Than this gets complicated depending on your tax bracket. If you make more than 100K (completely phased out at 150K), you CANNOT deduct rental INCOME loss from year to year (However, the losses disallowed from year to year because of high income are adding to the final cost basis when you sell your home). "Active" Professional Real Estate investors can deduct rental income loss regardless of income bracket (most people are considered "passive real estate investor". Active means you must devote at leat 700-750 hours a year to your real estate profession.
It is important to file your Schedule E everyear because the IRS will look at your returns and this guy/gal "double dipped" They claimed interest/property tax deduction on their 1040 personal but didn't file a Schedule E. But not all of the sudden is claiming a 130K loss on the property.
I was asking about cashflow losses and didn't think about capital losses. Sounds like cashflow losses can be carried forward until you sell the house and realize the loss, at which time the loss can be used to offset regular income?
Yes - We have had a rental business for about 12 years and it is set as an LLc. Our personal and rental taxes are done together and we have claimed a loss. Need a good account that know waht they are doing with rental experience.
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Have I been informed correctly?
