Deduct Loss created by Depreciation Expenses

[Vince Liu]

Hi Tax Experts,

I learned in a article that you can actually use the loss created by your real estate investments (of course it's not realized loss) to offset your W-2 wages and other income.  Is that true? Is there certain limitations?

i.e. if you have net income of $10,000 for the year and your desperation based on a 27.5 year of ($15,000) then you technically have a ($5,000) loss

Thanks in advance!

[Natalie Kolodij]

You can utilize rental losses in several situations

The most common are- MAGI being under $100k allows up to $25k in losses to be deducted if you meet material participation tests. Between 100-150k the amount phases out and over $150k no passive losses allowed. They roll forward to the next year. 

For RE pro status there is a lot more than just 750 hours test- you need to show that you spend more time on real estate than any other combined activities. So almost any one with a full time job won't qualify.