Investors & landlords

@KMJK 

The $25,000 maximum amount that can be deducted from nonpassive income is reduced by 50% of the amount by which the taxpayer’s modified adjusted gross income (AGI) exceeds $100,000 (Sec. 469(i)(3)(A)). Therefore, the $25,000 amount is totally phased out when the taxpayer’s modified AGI reaches $150,000. Modified AGI is AGI calculated without considering: 

• Individual retirement account deductions; 
• Interest deductions on higher education loans; 
• Taxable Social Security benefits; 
• Any passive losses allowed under the exception for real estate professionals; 
• The Sec. 250 deductions for foreign-derived intangible income and global intangible low-taxed income; and 
• Any overall loss from a publicly traded partnership.

Also added back to income is: 

• The Sec. 164(f) deduction for one-half of self-employment tax; 
• Income excluded for U.S. savings bond interest used for higher education expenses; 
• Any tax-free Olympic and Paralympic medals and prize money (determined without regard to the Sec. 74(d)(2)(A) $1 million AGI threshold); and 
• Amounts received from employer-provided adoption-assistance programs (Sec. 469(i)(3)(E) and Publication 925, Passive Activity and At-Risk Rules). 

For the phaseout, special rules apply for married taxpayers who are filing separately (Sec. 469(i)(5)). 

Strategies to maximize the $25,000 rental real estate loss allowance: Because the $25,000 loss allowance begins being phased out when modified AGI exceeds $100,000 and is completely phased out when modified AGI exceeds $150,000, tax-payers with income within or around this range can maximize the allowance with careful tax planning. Because the phaseout is AGI-sensitive, only strategies that increase either above-the-line deductions or shift income from one year to another will affect the deduction. 

To properly plan for the allowance, the following must be done before year end: (1) analyze the taxpayer’s active rental real estate activities and projected income and losses; and (2) estimate the taxpayer’s AGI. Strategies that reduce AGI may help increase the allowable deduction when taxpayers are subject to the phaseout. Deductible contributions to Keogh and simplified employee pension (SEP) retirement plans may help self-employed taxpayers reduce their AGI. Investing in tax-exempt securities or investments that defer income to later years (e.g., short-term certificates of deposit and Treasury bills) will reduce AGI. Similarly, self-employed taxpayers (using the cash method) can shift income from one year to another by timing when they bill and collect revenue. 

If you believe you still qualify, to take the loss as I can't see your return, you should go back through the rental interview and ensure you answered the questions that are relavent.

All the best.