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You can claim the expenses related to a rental home on Schedule E. If your Adjusted Gross income exceed $150,000,
then you may not use the loss in the current year.
Basically, you get to use expenses to the extent they do not exceed the rents received.
Any expenses that exceed the rental revenue are carried forward to the next year.
I understand that and I'm looking for suggestions of what we can do this year to ge able to deduct next year and going forward. Should we establish a LLC? Would that be an option?
As long as your income stays above the limit (150K) these losses carry forward until you sell the property.
I do not believe an LLC will solve this problem. However, I will opt out of your question so another expert may weigh in.
So we can't deduct our property taxes, HOA or anything? That is what I understood from the tax law but I was hoping there was something we could do this year to keep from paying additional taxes next year on income from the property.
Here is how it works. Say you receive 12,000 in rent. You may then deduct your RE tax, insurance, homeowners, etc. (say that is 10,000) form the rent for a profit of 2000. From that say you have $3500 of allowable depreciation. In your case, you could only take a $2000 depreciation deduction, and the rest ($1500) carries forward. The net effect on your current year taxes is zero.
Yes, I know that. Thanks.