Depreciation on rental property not making a profit?

[Diran Deukmajian]

I have a rental property (townhouse) in Los Angeles. The amount my tenant is paying me per month only cover 95% of my mortgage, HOA, and taxes.

Because this is considered a small loss per month/year, am I still able to depreciate the property from my taxes ($20K/year)?

My accountant said I cannot depreciate unless I make a profit.  If I don't, it gets rolled over to the following year ($40K) and so on, until I make a profit. 

[David M.]

@Diran Deukmajian

Yup, the losses get banked up as Passive Allowed Losses (PAL) year over year.  rental real estate was never intended to deduct your regular income.  "They" just sell you on "tax benefits" and people think that will decrease their yearly tax.  Right now, you are investing and aren't paying additional tax--think about that.

Also, one little explained aspect is the carried over PAL is also useful to reduce your taxes when you goto sell.  Because of this and other reasons, sometimes it easier/cheaper to sell than 1031.