The Standard Deduction exceeds Itemization

5 Replies

I have 2 rental properties. I have mortgages on each and am depreciating each. I am taking deductions for everything including travel (relatively local) and meals, plus the obvious like repairs, cleaning, etc.

When I do my taxes, I am seeing that my itemized deductions are slightly less than my Standard Deduction.

I gross about $125K., I have my 401K maxed out.

I have a very modest positive cash flow on both properties, but less now since I have no tax reduction.

Assuming I have done my taxes properly, this means that the miracle of a "real gain" but a "paper loss" is not working for me. This hasn't reduced my taxes a bit.

Any thoughts?

p.s. - Yes, if you look you'll see my post from last year challenging whether one should ignore tax consequences when calculating calculating cash flow. Irony noted. Lesson learned, make it a Quick Tip, let's move on :)

I am not an accountant but I think you are doing something wrong.

I believe deduction of expenses for your rentals has nothing to do with whether you itemize or take the standard deduction. Your loss or gain on your rentals is figured on its own separate schedule. You didn't mention depreciation which is where most paper loses come from.

My guess is none of my properties has a paper loss. If you have really good investments the depreciation does not fully cover the income. I strongly suspect however you are calculating things wrongly.


You are right, I've been looking at numbers until I couldn't think straight.

My depreciation losses did in fact reduce my taxable income. Nothing to do with my standard deduction.

Are your rentals reported on Schedule C or Schedule E?

Using passive losses to offset ordinary income is lipstick often used to fancy up crummy deals. Good rentals generate taxable income, even with depreciation. Not losses.

Realize too that the limit on the special allowance may come into play. Normally passive losses can't be used to offset ordinary income. There's a $25K "special allowance" that can be used if your AGI is under $100K. Over $100K this phases out $1 for every $2 of income over $100K.

I am by no means a tax professional. But it looks like you are experiencing with what my wife and I found out. Once you get past $125K in annual income you start loosing deductions.

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.