Can't write off rental losses until I sell??

[Loretta Chavez]

Just got our first rental property last year. We put in 25k in rehab plus it was not rented until 2017. My accountant said "Because it was over 150000 (taxable income I assume), IRS carried rental loss over to next yr. I put the int and taxes from rental on personal. Helped a lot." My question is, We can't write off the principal payments that weren't covered by rent? Can the down payment be written off? I'm new to this and not sure how to make sure my accountant did all she could with our deductions... She is in another city so we do thing via phone and text. She sent my packet via mail and once I get it I will look at it but that's not saying much since I'm allergic to tax rules. ;) and am clueless...

[Linda Weygant]

Your CPA did everything she could, but she did it wrong and if you get audited, you're likely to face penalties for "intentional disregard" as well as back taxes and other penalties and interest.  This isn't a "mistake".  

Your goal isn't to "do all you can with the deductions".  Your goal is to file your taxes according to the tax code.  And you haven't.

No, you can't write off the down payment and no you can't write off the principal.

The property taxes and mortgage interest are not deductible on your Schedule A unless this rental property is also your second home.  Which it sounds like it isn't.

Get yourself to a CPA that will file your taxes correctly.  Whatever tax savings you have this year are not worth the IRS crawling into your life with a microscope.  

There is no deduction for you in 2016 because you didn't place the property in service until 2017.  They may be a few carrying costs you could elect to write off, but if you're over $150K in income, then your CPA is at least right about one thing and that is that you cannot deduct rental losses at that income level.

They carry over to the next year and you can write those losses off against your rental income next year.  If you can't write them against the rental income next year because you still have losses, then they will continue to roll forward until the year your income drops down below the threshold, you finally have passive profits, or you sell the property.

Your issue here is not that you're complaining that your CPA didn't do enough.  It's that she did too much and you've just committed tax fraud.

I'm glad you're on Bigger Pockets to get some education.  I think you'll find it beneficial.