The National Directory of Certified Public Accountants

Ask A CPA - Rental Expenses

Are My Rental Losses Fully Deductible?

The total amount of your rental losses may be limited in the current year. If they are limited, the limited amount may be carried forward to future years. There are "passive loss" limitations involved with rental properties. If you have rental income from other rental properties or other passive entities, you may use the rental loss to offset that passive income. If the rental loss exceeds the passive income, the excess loss of up to $25,000 may be allowed if there is "active participation" associated with the activity and if your Adjusted Gross Income is less than $100,000 ($50,000 for Married Filing Separately). For Adjusted Gross Income between $100,000 and $150,000 there is a phase out. If the Adjusted Gross Income is more than $150,000, then no part of the $25,000 Special Allowance is allowed in the current year. Any disallowed loss in the current year may be carried over to future years. In general, "active participation" means you make management decisions. The passive loss limitation calculation is done on IRS Form 8582 and the 8582 worksheets. Speak to your local CPA about your rental loss deductibility.

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