How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Megan C Your Own Question
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16547
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Type Your Tax Question Here...
Megan C is online now
A new question is answered every 9 seconds

MyI income level is at $130,000 per year and I own a rental

Customer Question

MyI income level is at $130,000 per year and I own a rental house. My accountant told me last year that because I made over $100,000 I could not write off my expenses on the house which were substantial because I had to put in new refrigerated air/heating units. Can you tell me what the laws says?
Submitted: 3 years ago.
Category: Tax
Expert:  Megan C replied 3 years ago.

Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

Thank you for your question, and thanks for using Rental activities are passive activities, and you can write off up to $25,000 a year against active income. However, this amount is phased out when your AGI is over a certain amount - which is $100,000. Your income level is $130,000 and for every $2 your income is above $100,000 your allowance will be reduced by $1. So, your income exceeds the allowance by $30,000 so your allowance is reduced by $15,000. This means you can write off up to $10,000 in losses. You can CLICK HERE to read about this.

The disallowed losses are not lost forever. When you dispose of the rental activity, then you will be able to take that loss in the year of the disposition. This will help you with the income tax hit you may get if you sell your property for a gain. CLICK HERE to read more about this.

If you are a real estate professional, you can take the loss regardless of the amount. To be a real estate professional you need to spend more than 750 hours in qualified real estate activities and materially participate in the rental activity. If you also have a regular job, to qualify for a real estate professional you would also need to work more hours in real estate then you do other activities. If you have a 40 hour a week job that is unrelated to qualified activities, then it would be virtually impossible to qualify as a real estate professional. If you are married, only one spouse has to qualify to take the loss.


I also noted that you said you put in new HVAC system - the entire cost is not deductible in the current year. You will add this to the basis of your house and depreciate it over the remaining useful life of the house. I'm sure your accountant can help you ensure that you handle that aspect correctly.

Please let me know if you need additional assistance. Thanks again for using and have happy New Year.

** Please take a moment to rate my response as "Excellent" so that I may be compensated for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO RATE MY ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site*
You should be aware that your question, as with most tax questions, can never really be answered completely...addressing all the permutations; that is because of the many assumptions that have to be made I have done my best to determine what I think you are asking and answering it in the most direct and understandable manner possible. If, however, after reviewing the questions, you have any uncertainties or further questions, please do not hesitate to ask.