It will either have a gain or a loss. It can't have both. If your expenses are more than the income, you have a loss. The amount of loss you are allowed to take is a maximum of $25,000.
The
amount of rental losses that you can write off is proportionately phased out
between $100,000 and $150,000. For example, if your adjusted gross income
is $125,000, you can write off $12,500 in rental losses in the year of
the loss. If you are an active participant and your adjusted gross income
is $150,000 or more, you can write off
no rental losses on your tax return in the year of the loss.
When
your adjusted gross income is $150,000 or more, you cannot write off any losses
on your rental income. The amount of your loss sits in a separate account, and
you can only write it off against your capital gains upon qualified sale of the
rental property .(Sec. 469(g).
Under
IRC § 469(g), current and carryforward passive activity losses are fully
deductible in the year of an entire disposition in a fully taxable transaction
to an unrelated party.
