Question

Anwer owns a rental home and is involved in maintaining it and approving renters. During the year he has a net loss of $8,000 from renting the home. His other sources of income during the year are a salary of $111,000 and $34,000 of long-term capital gains. How much of Anwer’s $8,000 rental loss can he deduct currently if he has no sources of passive income?

Answer 1

Solution:

(1) Maximum possible $25,000 deduction before phase-out

(2) Maximum deduction phase-out is $22,500

    [($145,000 AGI - 100,000) × 0.5]

(3) Current year overall loss $2,500 (1) - (2)

(4) Rental loss in current year $8,000

(5) Current year leasing deficit of 2,500 dollars, Lesser of (3) or (4)

Passive loss carry forward $5,500 (4) - (5)