That's right, but you don't lose the losses. They can be carried forward and utilized when your property becomes profitable or when you dispose of the property. I believe the losses get tracked on IRS Form 8582. Turbo Tax should handle that for you. As always, you should consult a Tax Advisor for your particular circumstances.
@Justin Johnson , you still get the deductions. It's just if you have a tax loss on your rentals and other forms of passive income, you can't net them against your other forms of income (e.g., your W-2 wages) unless you or your spouse is a real estate professional. And even these losses aren't lost forever as @John Smeltzer mentioned. They are simply tracked and carried forward until you have passive income or you dispose of the property.
Based on your situation, looks like you make more than 150k a year, which is awesome. You can do few things:
- 1)First, see if you can find a way to decrease your AGI below 150 in you are on the borderline. Bunch of ways to do that. Talk with you CPA.
- 2)If you make way over 150, than I would suggest investing in diversified property groups with different outcomes (some rentals might not have a good future appreciation, but have a good cash flow that will absorb your other rental loss). Or Since you are a high earner, invest in other business as a passive investor where you can generate passive income.