Loss carry-forward and Household income
Hi everyone,
I'm doing some excel modeling to analyse properties and I have a couple of questions regarding losses carried-forward. Until today, I thought that a passive tax loss for a given year could be "stored" to offset another positive taxable income in the following years: i.e. If my rental generates a $1,000 loss this year but generates a $1,000 rental taxable income the following year, basically I wouldn't have to pay taxes the second year either.
But after reading a few articles, it seems like the ability of carrying forward losses depends on the household's total income. If household income is below $100k, you can save losses up to $25k (is it per year ? or total cumulative?), but if above $150k, then you can't use them anymore.. Is it the correct understanding? If so, it seems weird to me.
Second question: let's assume my property generated cumulative taxable losses of $25,000 over the 5 years I've hold the asset. Now, I decide to sale the property. Using the following figures:
Initial purchase price: $150,000
Cumulative depreciation: $50,000
Adjusted Basis: $100,000
Sale Price: $200,000
Capital gain: $100,000
Can I apply my cumulative $25,000 loss to this $100k capital gain (i.e. $75k net) before calculating capital gain taxes? If so, in this example, I would have depreciation recapture on $50k and normal capital gain taxes on $25k, correct ?
Thanks for your help