Ah, there's a big difference between improvements and repairs. The cost of property improvements generally must be capitalized and depreciated over several years (by following IRS depreciation tables) rather than deducted in the year paid. By contrast, the cost of repairs can be written off in the year you pay them.
Most rental properties create losses, but since rental income is passive, the losses created by rental properties are passive losses. You can only offset passive losses from other passive income. The losses will accumulate until you sell or otherwise dispose of the property or have passive income. Until then, all of the losses are suspended.
As John mentions above, there is a $25000 exclusion, but if your MAGI is over $150K, you can't use it. The exception phases out as your income rises.
- If you have modified Adjusted Gross Income over $100,000, the $25,000 rental real estate exception decreases by $0.50 for every dollar over $100,000.
- The exception is completely phased out when your modified adjusted gross income reaches $150,000.
Enter your repairs and depreciation for the improvements. The loss will carry over to future years on Form 8582. Once you have passive income or you sell the property, you can use the losses. But they won't make any $$ difference on this tax return.
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