Depreciate property to a loss?

Question

Hello, I’m going to have my first rental going up in the next 4 months. I should profit $800/mo from this rental. It is a 400k house (not sure land value yet) but I’m wondering if I can depreciate this into a loss and get a tax break on my personal taxes?

800*12 = $9,600/yr

Let’s say I was able to depreciate the house $12,000/year. Would I be able to write off a loss of $2,400 and carry that over to my personal taxes?

Basit Siddiqi · Answer

You depreciate a property regardless if it is cash-flow positive or negative.

Eamonn McElroy · Answer

Unless you or your spouse is a real estate professional, and assuming this is a traditional long-term rental, the activity will be passive and losses will generally be suspended or carried forward.  There is an up-to-$25k passive loss allowance for active participation in RRE that phases out between $100-150k of AGI.  It appears you may be eligible for that.  Google should provide more information if you want to dig into the details.

Daniel D. · Answer

@Ashish Acharya

My personal annual income is between 100-120 annually. I have no other businesses so no adjustments would be made other than what comes from the rental.

I’m married and I personally own the home and will act as the property manager. Is there any other information you’d like?

By the way, I found my appraisal.

Land = $160,000

Dwelling = $212,625

Garage = $27,860

Ashish Acharya · Answer

Yes, unless you are limited but Passie Activity Rule. If your AGI is between 100-150k, you will most likely get the offset. We need more info on your personal taxes, your involvement, and others to help you.