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If you're a landlord and you renting out a house and at the end of the year, you have $25,000 loss, you are allowed to use $25,000 of that loss against your income from your normal job, assuming you make less than $100K a year. Deductibility of Real Estate Rental Losses
What I don't understand is that this rule penalizes married couples. If you are single and make $100,000 a year, you are able to deduct up to $25,000 in your rental loss. But if you get married and your spouse make $50,000, you get to deduct ZERO dollar from your rental loss. Is that right?
Yes, you are correct but to clarify these income numbers are MAGI not gross.
The deductions aren't necessarily lost. They are just held over to next year. If you are unable to take them next year, they are rolled forward to the following year, etc.
If you are never able to take them, they are taken off the sale price of the house when you sell the property lowering the proceeds.
Yes, you are correct but to clarify these income numbers are MAGI not gross.
The deductions aren't necessarily lost. They are just held over to next year. If you are unable to take them next year, they are rolled forward to the following year, etc.
If you are never able to take them, they are taken off the sale price of the house when you sell the property lowering the proceeds.
Yes, I am aware that they are MAGI and not gross and I also understand that they can be rolled over year after year, and if not used, ultimately provides tax savings on the sales proceed of the property, BUT reducing capital gain rate.
What's unfair to me is that this rule penalize married couples. If a single person with $100K income (MAGI) will be able to take full benefit of the $25,000 reduction to his income tax rate. But, if he gets married to someone who's making $50K MAGI, they get to take zero reduction. Is that right?
Wrong forum for this. You made $150k in a year if you are losing $25k on your rental then you are just being stupid. The government isn't here to fund your poor business decisions.
Wrong forum for this. You made $150k in a year if you are losing $25k on your rental then you are just being stupid. The government isn't here to fund your poor business decisions.
To AZ Manager, please have several seats if you don't understand depreciation, mortgage interest, taxes, etc. and the sum of losses through owning several properties.
Back to jw2, correction.....the reduction in taxable income is actually $50K, since both individuals in my example above would qualify for the $25K reduction each if single. With that kind of combined income and assuming in a state where there is state income tax, the tax bracket could be 40% and that's $20K reduction in taxes per year. That's lots of coins.
To AZ Manager, please have several seats if you don't understand depreciation, mortgage interest, taxes, etc. and the sum of losses through owning several properties.
Back to jw2, correction.....the reduction in taxable income is actually $50K, since both individuals in my example above would qualify for the $25K reduction each if single. With that kind of combined income and assuming in a state where there is state income tax, the tax bracket could be 40% and that's $20K reduction in taxes per year. That's lots of coins.
I own 24 homes where 20 are rentals, 1 is rented to a family member for the cost of the mortgage, and 1 is used as an office (converted garage) and residencene for my on staff maintenance. Ontop of all those and the write offs they allow me I also have landscaping, pool maintenance, and equipment including two vehicles among other things. I fully understand deductions and their intended purpose and the only time I have ever had to claim a loss was my second year where the home I purchased needed a lot more work done to it than I anticipated. Like I said you shouldn't expext the government to clean up for your bad business decisions. If you are suffering any losses you screwed up someplace, most likely took a 15 year mortgage expecting the government to step in with fee money via deductions.
I own 24 homes where 20 are rentals, 1 is rented to a family member for the cost of the mortgage, and 1 is used as an office (converted garage) and residencene for my on staff maintenance. Ontop of all those and the write offs they allow me I also have landscaping, pool maintenance, and equipment including two vehicles among other things. I fully understand deductions and their intended purpose and the only time I have ever had to claim a loss was my second year where the home I purchased needed a lot more work done to it than I anticipated. Like I said you shouldn't expext the government to clean up for your bad business decisions. If you are suffering any losses you screwed up someplace, most likely took a 15 year mortgage expecting the government to step in with fee money via deductions.
Who is managing your 20 rentals? Do you do it mostly yourself, or do you hire people? Loses is not that common during the first couple of years when your interest payment is high and rent is low.
To AZ Manager, please have several seats if you don't understand depreciation, mortgage interest, taxes, etc. and the sum of losses through owning several properties.
Back to jw2, correction.....the reduction in taxable income is actually $50K, since both individuals in my example above would qualify for the $25K reduction each if single. With that kind of combined income and assuming in a state where there is state income tax, the tax bracket could be 40% and that's $20K reduction in taxes per year. That's lots of coins.
Quaker, I hear you, the marriage penalty is all over the tax code. I assume you are moving toward making a profit on your rental(s)? You can start applying your suspended losses to that or any other passive income. You just cannot apply the passive losses to active (W2 1099, etc.) or portfolio (stocks, bonds, interest, etc) income except the special $25,000 exemption as discussed.
Another option, if this was your main profession and you spend more than 750 hours a year on it and it occupies more than 50 percent of your time, you can call your self a real estate professional and it would no longer be a passive loss so you can deduct the whole thing.
I'm a bit puzzled by the question. You can only deduct a business expense one time. Two people can't deduct the same expense off of two different incomes. If you don't want to be married and filing jointly, I suppose there are two options. You could file married filing separately (and still business expenses only come off of one income), or you could get divorced so that both incomes fall below the ceiling.
It's no use expecting logic from the tax system. All you do is to make yourself crazy with no effect whatsoever on the IRS or Congress.
I'm a bit puzzled by the question. You can only deduct a business expense one time. Two people can't deduct the same expense off of two different incomes. If you don't want to be married and filing jointly, I suppose there are two options. You could file married filing separately (and still business expenses only come off of one income), or you could get divorced so that both incomes fall below the ceiling.
It's no use expecting logic from the tax system. All you do is to make yourself crazy with no effect whatsoever on the IRS or Congress.
Ha ha... you're puzzled because you don't understand the tax code.
Your options are not even..... You know, never mind. It all goes back to my statement above, you simply don't understand the tax code.
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