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Marvin,EA
Marvin,EA, Enrolled Agent
Category: Tax
Satisfied Customers: 1672
Experience:  Enrolled to Represent Taxpayers Before The IRS
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I bought a vacation rental property March 2008. It rents by

Customer Question

I bought a vacation rental property March 2008. It rents by the week or month. I had huge expenses since it needed to be completely furnished. I knew that I would be very much in the red for the year. I withdrew money from an IRA for the down payment. I knew I would owe taxes but figured that the loss on the unit would offset. Now I find-out that the IRA withdrawl pushed my magi over $150,000 making none of the loss a write-off. It appears that I owe a whopping $16,000 in taxes. Is there something I am missing? Can this really be true? Are there any expections?
Submitted: 7 years ago.
Category: Tax
Expert:  Marvin,EA replied 7 years ago.

Hello and thanks you for using Just Answer. The only exception is if you are a eligible real estate professional. The $25,000 active rental loss limitation does not apply to these taxpayers.

 

1 Individuals must materially participate in their rental real estate activities to qualify for unlimited loss deductions.

 

2 More than 50% of the individual's personal services during the tax year are performed in real property trades or businesses in which the taxpayer materially participates.

 

3 The individual spends more than 750 hours of services during the tax year in real property trades or businesses in which the taxpayer materially participates.

 

If you do not qualify as a real estate professional unused deductions, due to your gross income over $150,000, may be carried forward to subsequent tax years.

Customer: replied 7 years ago.
Well, you told me nothing that I did not already know.
Expert:  Marvin,EA replied 7 years ago.

I understand but IRA withdrawals must be reported on the taxpayer's federal tax return the year withdrawal. There are no exceptions.