Income loss from business closures caused national retail chains to pay just 58% of rent in May, slightly up from 54%\u00a0of billed rent<\/a> collected in April, according to The Real Deal and a report by data firm Datex Property Solutions<\/a>. This is a large drop from the same period last year: In May 2019, major retailers paid 96% of their rent, the report stated.<\/p>\n But there are some ways landlords can try to recoup their losses.<\/p>\n Most major property insurance carriers offer rental income loss insurance. Commercial property owners can purchase it as part of their CRE insurance. It typically is used to cover loss of income while a building is being restored. The insurance usually covers about one month of rental income, and extended coverage also can be purchased.<\/p>\n Rental loss income insurance may be available along with business interruption insurance, which covers loss of income while a property is closed due to an unforeseen event.<\/p>\n Homeowners also can purchase rental loss insurance for leased residential properties. The insurance generally does not cover rent loss due to owner negligence, such as a leak that was not fixed and caused further damage. Fire damage is typically covered, but flood and earthquake insurance often are sold separately. The insurance pays the fair market value of a rental.<\/p>\n A federal tax deduction for rental real estate loss is available for taxpayers who own and rent property in the United States. Up to $25,000 annually can be deducted as a real estate loss if the individual\u2019s adjusted gross income is $100,000 or less, according to Investopedia<\/a>. The deduction phases out for earnings from $100,000 to $150,000. Owners with higher adjusted gross incomes are not eligible for the deduction.<\/p>\n Related:<\/strong> 7 Common Myths About Rental Property Taxation\u2014Dispelled<\/a><\/em><\/p>\n A tax loss on rental properties due to a poor economy might be classified as a passive loss. There are passive activity loss (PAL) rules that allow owners to deduct losses if they are still collecting passive income from other sources, such as positive income from another rental property. If the passive loss is more than the passive income, the loss will be suspended until the owner has enough passive income or sells the underperforming property.<\/p>\n Owners also can explore whether their property would qualify for an exception to the PAL rules, allowing them to deduct rental property losses sooner.<\/p>\n Some owners will be helped by the recent suspension of the excess business loss disallowance rule for tax years 2018-2020. The Coronavirus Aid, Relief, and Economic Security (CARES) Act postponed the rule, which would have disallowed current deductions for losses exceeding $250,000 ($500,000 for married couples filing jointly).<\/p>\n If you cannot deduct your rental loss, you can carry it forward into future tax years to deduct against future rental profits. For real estate investors, loss from rental properties is often a passive loss.<\/p>\n The Internal Revenue Service does not deduct a passive loss against ordinary income. However, real estate professionals usually can deduct rental losses from their income. The IRS website has more details<\/a>.<\/p>\n Related:<\/strong> Your Tax Write-Offs Could Affect Your Ability to Get a Loan: Here\u2019s How<\/a><\/em><\/p>\n Some mortgage servicers are allowing property owners to reduce or defer payment on mortgages if income is lost due to COVID-19. Bank of America<\/a> is among those offering additional support for consumer and small business clients.<\/p>\n Properties often trade less frequently during a recession, and filling vacancies can take longer than usual. To keep space filled, property owners and operators can work to retain current tenants. Lease renewal negotiations can begin earlier than usual.<\/p>\n Short-term leases also might be an option to fill space. Clear communication with tenants is important so landlords can offer tenants a top experience. Providing for tenants\u2019 needs safely and efficiently can help keep commercial space occupied.<\/p>\n Pandemic-related business shutdowns have shaken the nation\u2019s economy and left many businesses facing income losses. CRE insurance, mortgage lenders, and tax deductions can help real estate professionals keep afloat.<\/p>\nRental Loss Insurance<\/h2>\n
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<\/p>\nFederal Tax Programs<\/h2>\n
Deductions<\/h3>\n
Demonstrating Loss<\/h3>\n
Forwarding Losses<\/h3>\n
Mortgage Services<\/h2>\n
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<\/p>\nKeeping Space Occupied<\/h2>\n
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