Pearl City, HI · Member since 2015 · 18 posts · 1 vote
Schedule E shows $52k in losses for 6 properties. Due to mortgage interest, depreciation, repairs, supplies, maint fee, etc. But allof that only reduced my earn income by $6k. Sounds like I’m doing something wrong. Thoughts??? Any help would be appreciated. Thank you
Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
7y
It's impossible to give you a definite answer without seeing the return and discussing your facts and cirucmstances.
However --
If (1) you are not a real estate professional and (2) your modified AGI is between $100k and $150k, it sounds like the return is calculating correctly.
RE losses are passive in nature if you're not an RE pro. There is a $25k passive loss allowance for taxpayers that actively participate in a rental real estate activity if their modified AGI is less than $100k. The allowance phases out for MAGIs over $100k and is completely gone at or above $150k.
Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
7y
It's impossible to give you a definite answer without seeing the return and discussing your facts and cirucmstances.
However --
If (1) you are not a real estate professional and (2) your modified AGI is between $100k and $150k, it sounds like the return is calculating correctly.
RE losses are passive in nature if you're not an RE pro. There is a $25k passive loss allowance for taxpayers that actively participate in a rental real estate activity if their modified AGI is less than $100k. The allowance phases out for MAGIs over $100k and is completely gone at or above $150k.
Accountant · Louisville, KY · Member since 2017 · 32 posts · 25 votes
7y
Using Eamonn's scenario it might be worth mentioning that the remaining $46k worth of loss does carryforward to future years. If you're preparing your return on your own you'll want to make sure to look for the carryforward in the following tax year and the remaining amount may be deductible depending on your income. You should be able to locate the carryforward on form 8582.
Thank you. That makes sense now. I guess gonna have to go over some strategies to make it work better in our favor for the future.
You're unlikely to have "strategies to make it work better" if you have full-time W2 jobs. If you're married, and one of you has a regular W2 job while the other is a full-time investor - then maybe.
The remaining $46k loss is not wasted. It is pushed into the future and will be released when you sell properties.