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Wendy Reed
Wendy Reed, Enrolled Agent
Category: Tax
Satisfied Customers: 3346
Experience:  15+ years tax preparation and tax advice.
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I have an investment property that I am losing money on each

Resolved Question:

I have an investment property that I am losing money on each month. The mortgage is approx $2000 with an additional $400 HOA fee. The rent i'm recieving is $1450 so i'm taking an almost $1000 loss each month. In the past i believed that this loss was deductable but i didn't recieve a deduction last year from the loss. Was this a mistake my tax preparer made or is this loss not deductable?
Submitted: 5 years ago.
Category: Tax
Expert:  Wendy Reed replied 5 years ago.

Thank you for giving me the opportunity to assist you. I will give the best answer that I can with the information provided.

 

Hello there,

Your actual loss for tax purposes is not your mortgage payment minus rent---it is a little more complex than that. You are allowed to deduct your mortgage interest, property taxes, fees, most expenses, etc. and deprectiation for the property. Most persons who own rental real estate have losses in the first few years especially.

 

For tax purposes, in general you are allowed a loss of up to $25,000 per year as a real estate, passive loss (less if you file married separately) but there is an income limitation to the loss that you are allowed to take. If your Adjusted gross income is greater than 100K, $1 of your loss is disallowed for every $2 over 100K that you earn. This means that if your income was 150K, your loss would not be able to be taken on the current return. However--your loss carries forward, so that when you have other passive income or you have less overall income (or you sell the property) you can take advantage of this loss.

 

Here is more detail: http://www.irs.gov/taxtopics/tc414.html

 

page 13 in this pub for loss limits: http://www.irs.gov/pub/irs-pdf/p527.pdf

 

Please let me know if I can assist you further.

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