Landlord Tax Tips: The $25K Loss Deduction

Crucial Tax Tips for Landlords, Tip #16
AbacusMost rental owners claim tax losses, even when they are making a profit. You can deduct up to $25,000 of rental losses on your tax return if your adjusted gross income is less than $150,000.

If your adjusted gross income is less than $100,000, you can deduct the full $25,000.

If your adjusted gross income is between $100,000 and $150,000, you can deduct up to ($150,000 – Your Income)/2. So if your AGI is $120,000, you can deduct up to $15,000 (150k – 120 k)/2.

When your adjusted gross income exceeds $150,000, you are not permitted to report a loss from rental activity. The only way to avoid this limitation is if you become a real estate professional.

If rental losses exceed the deduction limit, the passive activity loss is carried forward for a maximum of 15 years until the loss can be deducted. If you sell the property, you can deduct the carryover loss from the gain of the sale.
Everyone’s tax situation is different, and this information should not substitute professional advice. Taxpayers should always consult with their tax advisors to consider specific factors that might affect their situation.

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