Rental Property loss

General Real Estate Investing
1

I have a question. We have a rental property that produced $750 last year. Couldn’t get the thing rented. We owned it (still do) for about 4 months. Total expenses were about $7000. In my book, that’s a loss. But when I run those numbers through TaxAct, online tax filing software, I’m told that I had 0 proft or loss from the property. Is there an income threshold that cannot be exceeded for a rental house loss to be filed?

Thanks,
Mike ???

2

I agree with you. You do have a net rental loss for the year.

How much of your rental loss you can claim on your tax return, and how much you have to suspend and carry forward to next year is determined by your other ordinary income.

If you have $150K or more in other ordinary income, then you can not take any rental loss this year. Instead, you have to suspend your losses and carry them forward to next year, when they may be used to offset next years net rental income.

If the situation above does not describe your circumstances, then you might check your data entry again. Can you review your tax return to see that your data is actually being entered on Schedule E and is being entered in the correct fields?

While I have never used TaxAct, I have heard that TaxAct online is not terribly user friendly and the online help is really poor. I recommend the desktop version of TurboTax Premier because, of all the versions of TurboTax, the Premier version has the most robust help module and the most comprehensive guided interview.

3

Thanks for the info Dave. Being in the prior situation you described, (my wife and I exceed $150k by $78!), does that mean that we can never have a net loss, but only reduce our rental earnings by the amount of our expenses??

Mike

4

Yes you can have net losses, on paper. You just can not use your net rental losses to offset other ordinary income on your tax return. As far as your 1040 is concerned, the amount of income (loss) from your Schedule E that goes on page one of your 1040 will be zero.

Carry the loss forward to the next tax year as a prior year suspended loss. Eventually the loss will be used, (1) when your net rental income gets larger, or, (2) when your ordinary income gets smaller, or, (3) when you sell your rental property.

5

Thanks again for your help…very much appreciated.

Mike