Can my new rental property have a loss that exceeds gain

[Coleen3 · Accepted solution]

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.