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 Phillip B, EA Your Own Question

Phillip B, EA
Phillip B, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 642
Experience:  Practicing since 2004. Expert in 1040, small business, represent vs. IRS, & int'l tax mattters.
20877915
Type Your Tax Question Here...
Phillip B, EA is online now
A new question is answered every 9 seconds

I have a rental property that I participate in rental activies

Resolved Question:

I have a rental property that I participate in rental activies that I am thinking about selling next year. It will sell for a loss that will be over $25,000.00. I am a active participant in the rental activities for two more rental properties that I own that I am not looking to sell. I make under $100k MAGI a year. If I sell the property for a $40,000.00 loss and the other properties produce no income I can claim a $25,000.00 loss against my other income. My questions is can I claim the other $15,000.00 loss the following year against my regular income?
Submitted: 1 year ago.
Category: Tax
Expert:  Barbara replied 1 year ago.

Welcome and thank you for giving me the opportunity to assist you with your tax question.

 

The criteria is as follows:

 

Usually, real estate rental losses cannot be used to offset other types of income such as wages, interest, dividends and gains from investments other than rental real estate.

However, there are exceptions.

 

Taxpayers that actively participate in the rental real estate activity and have modified adjusted gross income of less than $100,000. If your MAGI is less than $100,000, you can claim up to $25,000 in losses from active participation rental real estate. If MAGI is between $100,000 and $150,000, the $25,000 maximum is reduced by $1 for every $2 that your MAGI exceeds $100,000. For example, if your MAGI is $140,000 you would reduce the $25,000 by $20,000 to claim up to a maximum of $5,000 in rental loss. The limits are the same for single or joint filers.

 

Another limited exception exists for real estate professionals. The rental losses of real estate professionals are allowed fully against other income. A real estate professional is a person that spends more than 750 hours a year involved in the real estate business such as a property manager, Realtor, developer or substantial investor.

 

The loss does carry forward to subsequent years using the same criteria.

 

Please let me know if you require further information or clarification. Thank you.

Expert:  Phillip B, EA replied 1 year ago.
Thanks for choosing JustAnswer.com! Let me provide a more concise and clear answer to your actual question.

The loss on the sale of your one rental property is going to be fully deductible in the year of the sale as an ordinary loss. The 25,000 dollar limit only applies to rental activity losses, not the loss on the sale of the rental property. Therefore you will deduct the full 40,000 dollar loss on the sale of the rental property in one year, and no part of that loss will carryforward (unless the 40,000 dollar loss brings your total income to a net operating loss).

If the 40,000 dollar loss was from your regular rental activities (not from the sale of the rental) you would only deduct 25,000 dollars and carry the remainder to the next year.

If there are additional questions, please reply to this answer so that I may assist you further. If this answers your question, please rate my performance between OK and Excellent so that I may receive credit for assisting you. Thanks for your business.
Expert:  Barbara replied 1 year ago.
My apologies for my answer to you. I misread your question. The second expert's answer to you is correct.
Customer: replied 1 year ago.

Thanks for the info. The net operating loss bring me to my follow up question. Say I make 50,000 a year MAGI at my regular job and I have the $40,000.00 loss on the sale of the rental property. I then after closing out the year on the other rental properties have a loss of $20,000.00 in this situation I have a $10,000.00 loss for the year. Does that carry over to the next year then? What gets priority on the tax paperwork?

Expert:  Phillip B, EA replied 1 year ago.
Yes, the NOL could be carried forward to 2014. NOL's usually carry back 5 years, and then carry forward 20 years. However, you can (and will want) to add a written election to your return that you will forgo the carryback period. This will make it so the full 10,000 dollar loss carries forward to the 2014 tax year.

Let me know if there is anything else that I can do for you.
Phillip B, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 642
Experience: Practicing since 2004. Expert in 1040, small business, represent vs. IRS, & int'l tax mattters.
Phillip B, EA and 2 other Tax Specialists are ready to help you

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
 
 
 
Chat Now With A Tax Professional
Phillip B, EA
Phillip B, EA
Tax Professional
642 Satisfied Customers
Practicing since 2004. Expert in 1040, small business, represent vs. IRS, & int'l tax mattters.