Have a Tax Question? Ask a Tax Expert
Thank you. Three follow-up questions:
1. You refer to "ordinary income" and "earned income". I am retired and receive a yearly pension of $175,000 including social security, and have been paying taxes on it. My wife has a pension of $140,000 and we have been filing jopintly. Are pension benefits considered ordinary but not earned income, and if so I guess I cannot put part of that money in a solo 401 K up to the maximum allowed per year. Correct? But, as a self-employed real estate agent, please confirm that I can contribute to a solo 401 K from "previously tax funds" including previously taxed pension income?
2. I take it that I cannot deduct up to $25,000 of rental losses because the deductability phases out after income reaches $150,000 even if my income from real estate is less than $100,000. Correct? In which case, is the only way to deduct the $75,000 cummulative loss from this rental property when I sell the property? That $75,000 loss includes straight-line depreciation; how much will need to be recaptured.