When you own rental property, you may deduct all of your expenses such as repairs, maintenance, mortgage interest, property insurance, property taxes
and depreciation. If you end up with a loss, if you actively participate in the management of your rental property, you may deduct up to a maximum of $25,000 in losses in any one year against your other income.
However, there are income limitations which apply, and these limitations apply to your total loss, not just the depreciation losses.
The maximum allowance is:
$25,000 for single individuals and married individuals filing a joint return for the tax year,
$12,500 for married individuals who file separate returns for the tax year and lived apart from their spouses at all times during the tax year, and
If your modified adjusted gross income (MAGI) is $100,000 or less ($50,000 or less if married filing separately), you can deduct your loss up to the amount specified above. If your MAGI is more than $100,000 (more than $50,000 if married filing separately), your special allowance is limited to 50% of the difference between $150,000 ($75,000 if married filing separately) and your MAGI.
In your particular case, since your combined income is $200,000, you would not qualify to claim any excess losses. The only losses you can claim are up to the amount of your rental income. Excess losses are not deductible.
The deductions can be split by filing separate returns, but the rental loss only applies in situations where you have lived apart for the entire year.
Under the circumstances, you would not be able to claim any excess losses over the amount of rental income you received.
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Thank you Paul.