Schedule E unallowed passive Loss

[kzaccountingllc]

My client is makes over 150k (single) in his W2 income and he had 2500 loss from his rental property.  According to the IRS guideline that rental income are considered to be passive and because his income is over 150k, and therefore all the loss is suspend and have to carry to 2019.  He insist that he spend more than 750 hours to participate in his rental property and he is active.  He only has 1 hour and even I checked the "active participation" box and still the loss is suspend to 2019.  Is there any else I can do to help him get the loss allowed in 2018?

Thanks

[TaxGuyBill · Accepted solution]

"He insist that he spend more than 750 hours to participate in his rental property"

*IF* he qualifies as a Real Estate Professional (which includes that he Materially Participates in the rental activity), he would qualify for the Real Estate Professional exception.  There is a check-box on the Federal Info Worksheet (the first page where you enter the name, address, Social Security Number, etc. of the taxpayer) for that.

https://www.irs.gov/publications/p925#en_US_2018_publink1000104591

However, you may want to verify that he meets the requirements, and perhaps even have him sign a statement that he meets the requirements of a Real Estate Professional.

[kzaccountingllc]

Thank you so much for your help, really appreciate it.

[sjrcpa]

Know that IRS has begun auditing Real Estate Professionals. With a full-time W-2 job this status will be hard to prove.

[TaxMonkey]

The concept you are looking for is called "real estate professional"  Is his W-2 real estate related?

[sjrcpa]

Active only means you qualify for the $25K exception for deducting losses if your income is <$150K.

Rental property is passive. He makes too much to deduct the loss this year. It gets carried over to next year. End of story.