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Jeff17
New Member

Can I file a schedule C to offset taxes on W2 from husbands employment or do I have to file schedule E on a short term rental property

 I spend about 2 hours a week on website maintenance and bookkeeping on this property.  My husband and I do have an LLC partnership?

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Accepted Solutions
JaimeG
New Member

Can I file a schedule C to offset taxes on W2 from husbands employment or do I have to file schedule E on a short term rental property

The IRS states that unless you are considered a "Real Estate Professional" you must claim this income as Passive Income with Schedule E. One of the first rules for this is that you must work at least 750 hours per year in the Real Estate Industry. Additionally Passive Income cannot offset Ordinary Income (wages, Self-employed, etc.). Nevertheless the IRS does have the $25,099 Special Allowance.

"Special $25,000 allowance.   If you or your spouse actively participated in a passive rental real estate activity, the amount of the passive activity loss that’s disallowed is decreased and you therefore can deduct up to $25,000 of loss from the activity from your nonpassive income. This special allowance is an exception to the general rule disallowing the passive activity loss. Similarly, you can offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception.

  If you’re married, filing a separate return, and lived apart from your spouse for the entire tax year, your special allowance can’t be more than $12,500. If you lived with your spouse at any time during the year and are filing a separate return, you can’t use the special allowance to reduce your nonpassive income or tax on nonpassive income.                           

  The maximum special allowance is reduced if your modified adjusted gross income exceeds certain amounts."
https://www.irs.gov/publications/p925/ar02.html#en_US_2016_publink1000104571

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1 Reply
JaimeG
New Member

Can I file a schedule C to offset taxes on W2 from husbands employment or do I have to file schedule E on a short term rental property

The IRS states that unless you are considered a "Real Estate Professional" you must claim this income as Passive Income with Schedule E. One of the first rules for this is that you must work at least 750 hours per year in the Real Estate Industry. Additionally Passive Income cannot offset Ordinary Income (wages, Self-employed, etc.). Nevertheless the IRS does have the $25,099 Special Allowance.

"Special $25,000 allowance.   If you or your spouse actively participated in a passive rental real estate activity, the amount of the passive activity loss that’s disallowed is decreased and you therefore can deduct up to $25,000 of loss from the activity from your nonpassive income. This special allowance is an exception to the general rule disallowing the passive activity loss. Similarly, you can offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception.

  If you’re married, filing a separate return, and lived apart from your spouse for the entire tax year, your special allowance can’t be more than $12,500. If you lived with your spouse at any time during the year and are filing a separate return, you can’t use the special allowance to reduce your nonpassive income or tax on nonpassive income.                           

  The maximum special allowance is reduced if your modified adjusted gross income exceeds certain amounts."
https://www.irs.gov/publications/p925/ar02.html#en_US_2016_publink1000104571

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