Tax question for a loss on a rental property

6 Replies

Hi BP community, I am a small investor from upstate NY. I have 5 rental units, 1 a single family home and 2 two family homes that I rent.

I am Wondering how the math works when calculating a loss on one rental property against a profit on another rental property, Here is my scenario:

Single family home has not paid rent due to COVID and I cannot evict them. It has been a full 12 months I have not received rent. (eviction process was started before COVID happened and then the courts shut down) Tenant now owes me $14,400. Can I claim the full $14,400 as a loss on my taxes? or can I only claim my mortgage interest, taxes, insurance etc. for those 12 months as my loss? 

Additionally, if I show a profit of $5,000 of my other two properties which I would assume to pay about $1,000 in taxes on. is that $1,000 deducted from the $14,400 loss,  meaning I would really not pay any taxes on the $5,000 and would be left with $13,400 in a loss that I could deduct on future years on profit?

Any insight would be helpful!

I am very curious why I am not hearing many people talking about the ban on evictions and the loss of rent?! Is it because it's not really a loss if you have other properties and can get the tax deduction for future years? I have no hope in ever getting any money from the tenant, they are completely taking advantage of me and the COVID situation. hoping there is some other way to get that money back from the government. 

@Andrea Coulter The best advice anyone can give you is to seek out a CPA. Talk to a few in your market and find one that works with real estate investors! These are complex tax related questions. 2020 has been a wild ride. I would not tackle your tax returns alone. The fee associated with filing your taxes are deductible anyways. Best of luck. 

Not sure what Covid specific claims that you might be entitled to, but you typically can not claim a tax loss for income not received if you are on the cash method of accounting which I will assume you very likely are. 

You don't have a loss for tax purposes because you never brought the amounts to be received in cash into taxable income in the first place.

Generally you cannot claim lost rent on a cash basis method. 

I am also curious why there is not more talk about the ban on evictions. I am wondering what peoples experiences have been with this.

@Christoper Smith Thankyou for the Info! I am hoping that there might be someway to claim it this year because of the extreme circumstances of having to keep a tenant that won't pay, when I should be able to evict and move forward to make a profit! As a small landlord being forced into paying 12 months of a mortgage, taxes, insurance, and maintaining the property is extremely difficult. 

@Daniel Hyman  Thankyou for the info! yes I am baffled as to why this is not the main topic on threads, esp. with it most likely being extended even further!? Are landlords just not speaking up?? I don't understand how the government can tell me that I have to continue to pay for someone else to live in my house?! Why not tell grocery stores they have to provide free food as well? Is there a discussion going on about this that I don't know off? I have searched BP multiple times without finding to much info. 

@Andrea Coulter
No, you can’t claim the $14,400 itself as a loss, you just don’t have that income.  The loss from this property (mtg interest, taxes, insurance, repairs, etc) simply gets combined with your other properties, into one income less total expenses equals your Net income or loss.  If you actually netted $5k taxable income on your other properties and this one property showed a $10k loss, then your taxable income would be a Loss of $5k.

You definitely need to sit down with a cpa.

@Andrea Coulter

1 - You can't claim the rent you didn't receive as an expense. You are indirectly getting a "benefit" by being able to report the expenses without any income(since you didn't receive cash).

2 - For tax return purposes, you can offset rental income from one property with rental losses from another property.