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James Daloisio
James Daloisio, Tax Attorney
Category: Tax
Satisfied Customers: 1034
Experience:  24 years of continuing education and experience.
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I am completing my I cane taxes for 2014-2016. Beginning in

Customer Question

I am completing my I cane taxes for 2014-2016. Beginning in 2014, I became an active manager of my real estate portfolio as defined by the IRS, while maintaining a corporate job with w2 income.As I understand it, my real estate losses will now be active and can be applied in the fiscal year. Is the limit to my refund tied to the taxes paid out from the w2 income?
Submitted: 10 months ago.
Category: Tax
Expert:  Barbara replied 10 months ago.

Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

In order to be able to offset your W-2 income, you need to meet two requirements in order to qualify for the tax benefits of being a real estate professional.

The Requirements are:

  1. Spend more time in real estate activities than other “non-real estate” business activities combined.
  2. Spend at least 750 hours per year in real estate activities.

Please note that both requirements must be met in order to be designated as a real estate professional in the eyes of the IRS.

The following link contains excellent information you will find helpful:

https://www.nolo.com/legal-encyclopedia/can-you-deduct-your-rental-losses.html

Please let me know I can assist you further.

Thank you and best regards,

Barb

Customer: replied 10 months ago.
I understand your answer. My question was now that my real estate activity is active losses, will those go against my taxes that were withheld in my w2 income and is there a limit to how much refund I can get back? I’m assuming it’s limited to the amount of taxes paid in w2.
Expert:  Barbara replied 10 months ago.

The losses will offset your INCOME not the taxes you paid.

Customer: replied 10 months ago.
But if taxes were withheld based upon my w2 income and my losses lower my overall income I will get a refund correct? Is there a limit to the amount of the refund?
Expert:  Barbara replied 10 months ago.

That's correct. You will receive a refund. There is no limitation on refund amounts.

Customer: replied 10 months ago.
Ok, thank you. I️ asked about the limit because the software I am using capped the refund at $50k.
Expert:  Barbara replied 10 months ago.

Can you upload a screen shot of what you are seeing?

Customer: replied 10 months ago.
Customer: replied 10 months ago.
You’ll see that no matter how much losses I put in I’m capped at $50k refund
Expert:  Barbara replied 10 months ago.

You uploaded the mortgage interest deduction page

Customer: replied 10 months ago.
My wife and I paid approximately $48k in federal taxes that year between her and my w2 income. It would make sense if the refund capped at the amount of taxes we paid but seems strange to cap at an even $50k
Expert:  Barbara replied 10 months ago.

I cannot see what you're seeing or how you answered the interview questions.

I will opt out so another expert can assist you.

Expert:  James Daloisio replied 10 months ago.

Hi, my name is ***** ***** welcome to Just Answer. Let me jump in here and see if we can solve this mystery.

Unless you have some refundable credits, your refund is limited to the total of the payments you've made. In addition to federal withholding, payments can include a variety of other items including excess social security taxes. Please look at page 2 of your form 1040 for 2014 and compare the figures on lines 64 and 74. If line 74 is larger, the difference should show up on one or more of the lines from 65 to 73.

Also: becoming a "real estate professional" requires "material participation" as to each rental activity, unless you make an election pursuant to Section 469(c)(7) to treat all activities as one. Be prepared to demonstrate to the IRS how you meet the criteria for material participation as this is one of their high value targets for examination.

Let me know if you need more info; also let me know how your figures came out. Thanks.