Yes, you can claim $25,000 passive losses against your W2 income during a tax year. If the property loss is more than your income, you will not receive a refund or credit for the net loss. Here is how it works..
- If your W2 income is $20K and your rental loss is $28K, $25K is used to reduce your W2 below zero. $3k is a suspended loss that is carried forward into the next tax year. In this situation, $20K - $25K = ($5K) For tax purposes, that ($5000) is negative income but you do not receive a credit or a refund for the deficit. It just merely moves your taxable income to 0.
- Now if your W2 income is $30K and your rental loss is $28K, $25K is used to reduce your W2 to $5K. In this scenario, $30K-$25K = $5k. $3k is a suspended loss that is carried forward.
- If your losses are below $25k, then the entire amount will be used to reduce your W2 income.
- In some cases, it may not be your best advantage to claim passive losses especially if your W2 income is below the filing threshold.
With all of this said, you will not file your non-resident return with Turbo Tax. We have an affiliate called Sprint Tax. In this link, they have easy to use software that will guide you through the return as seamlessly as possible.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
