Passive loss rental

[MGC94]

Can tax payer who actively participates take a passive loss on rental. He chooses tenant. Does all the repairs. Is not a realtor. Thanks

[sjrcpa]

He can deduct up to $25,000 losses depending on his modified AGI and filing status. Form 8582 shows the calculations.

[Just-Lisa-Now-]

maybe, what are YOU seeing?

[MGC94]

MFJ line 1 wages $133,201 line 4d pension $69,277 line 7 -$20,372. Total income $182,106 adjustment to income $250 AGI $181,856   

[rbynaker]

Sorry pal, no PAL. 🙂  AGI is over $150K so you're beyond the phase-out range.

Isn't line 7 capital gains?  How did you get beyond the -$3K limit on losses?

Rick

[MGC94]

I got beyond $3,000 loss with passive activity clicked. When I un do it there isn't even a loss. It only says 0. Even though the loss was that amount. So if over $150,000 income you cant do passive loss 

[sjrcpa]

Over $150K no $25K exception to the PAL rules. If there is a complete disposition in a taxable transaction suspended PALs associated with that activity are deductible. Basic IRC  Section 469.

Did you actually look at the 8582 and its worksheets? And the instructions?

Since you don't know this you definitely should.

[MGC94]

I do not get how pro series would put it through. It seems the income amount 

[MGC94]

why won't it do the $3,000 at least? 

[abctax55]

@MGC94 

Operating income/losses on real estate have NOTHING to do with capital gains/losses.

You are very confused on this issue. 

I suggest:

1) Find a mentor to help as you are doing a disservice to your client

2) Seek local professional advice if you are not a professional tax preparer.

[rbynaker]

I may be complicit in this confusion.  Way back up there I read:

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@MGC94 wrote:

MFJ line 1 wages $133,201 line 4d pension $69,277 line 7 -$20,372. Total income $182,106 adjustment to income $250 AGI $181,856   

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but now it sounds like this was a passive activity loss (so probably "line 7" is just a typo which led us down the capital loss rabbit hole).  The passive loss would pass through Schedule 1 and end up on line 8 instead of line 7.

[abctax55]

Rick... maybe... maybe not.

But the disconnect between $ 3000 capital loss & rental real estate income/loss/PIGS & PALS still exists.

[MGC94]

so if you dont take passive losses a rental can only come across as 0? 

[rbynaker]

PAL 101:

Passive losses are limited to passive income.

If AGI is low enough, passive losses from a real estate rental might be deductible up to $25,000.

Suspended passive losses get freed up when the activity is disposed of in a fully taxable transaction.  So quite often I see several years of suspended losses, followed by a big loss allowed in the same year that there is a capital gain on the sale of the real estate (I have one that came in Sunday that I haven't looked at yet!)

[MGC94]

So am I correct in saying that line schedule 1 line 5 can only be 0 if the income is over $150,000? 

[MGC94]

Would that be right only $0

[rbynaker]

Yes, $0.  AGI is too high.