Does rental deduction deducted from only rental income or the entier income including W2 income for example

[tarif-mohaisen]

I've spent money on a property I bought but never got the chance to rent it last year, would I  be able to claim/deduct any of these expenses ?

Also does expenses on improvement comes from the over all income including income from W2 or just from the rental property income ?

[ChelsiE2]

Rental expenses are taken against associated rental income amounts.  If these expenses are greater than the income, this is called a Rental Loss.  

A Rental Loss can only be used to offset other income reported on your tax return if you are an Active Participant in that rental property.  In this case, you would be allowed to deduct up to $25,000 worth of rental losses to be offset against other income items on your tax return (such as your W-2 wages).

The IRS defines an Active Participant as: "You (and your spouse) owned at least 10% of the rental property and you made management decisions or arranged for others to provide services (such as repairs) in a significant and bona fidesense. Management decisions that may count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and other similar decisions."  

For more information, please see: IRS Publication 527

[tarif-mohaisen]

But from some reason Trubtax is giving me zero for defection even though my net loss is in thousands !!

[ChelsiE2]

@tarif.mohaisen By defection, do you mean depreciation?

[tarif-mohaisen]

Sorry I meant deduction. My expenses in the thousands but TurboTax shows zero for deduction to be claimed !!

[ChelsiE2]

@tarif.mohaisen
When TurboTax asked if you were an active participant, did you say "Yes"?

[tarif-mohaisen]

yes  I did, I went through the guide to determine if I'm an active participant !!

[ChelsiE2]

@tarif.mohaisen
Here are some other reasons you may not be getting the deductions:
- Modified adjusted Gross Income > $150,000
- You are a limited partner in this rental
- You own less than 10% of rental
- The rental is for something other than real estate.  Equipment, computers, boats, vehicles, etc.  Leases of personal property are generally passive regardless of the level of participation

[tarif-mohaisen]

so if income > $150,000 can't  claim any of the rental deductions ?

[ChelsiE2]

If your modified adjusted gross income (MAGI) is $100,000 or less ($50,000 or less if married filing separately), you can deduct your loss up to the amount specified above. If your MAGI is more than $100,000 (more than $50,000 if married filing separately), your special allowance is limited to 50% of the difference between $150,000 ($75,000 if married filing separately) and your MAGI.  Generally, if your MAGI is $150,000 or more ($75,000 or more if you are married filing separately), there is no special allowance.

[realtor123]

I have a similar question. My LLC has $200K income (lets say some consulting work). Same LLC owns real estate and has depreciation received is $100k.  Can this $100K be allowed to apply on $200K income ?

Thanks in advance

[Critter-3]

"same LLC owns a rental" ?    Unusual ... so is this a single member LLC ?  Is the RE the building the business is in ??

[realtor123]

Yes, same LLC owns rental properties and also generates some income through consulting. Right, it is Single member LLC.

[Critter-3]

Ok ... as a single member LLC the consulting goes on the Sch C and the rentals go on the Sch E as if no LLC exists....  UNLESS you incorporated ... if so it all goes on the 1120S.

[Carl]

@tarif-mohaisen 

so if income > $150,000 can't claim any of the rental deductions ?

You understanding doesn't appear to be clear. You will "CLAIM" all deductions you can on the rental property. But if your income is to high, your deduction will not be allowed. The unallowed deductions will be carried over to the next year. But if you do not claim the deductions in the tax year they occur, then you can *NEVER* claim or take those deductions in a future year.

The only thing different about that is depreciation. You are *required* to claim depreciation every year the property is classified as a rental, no matter what. Weather the depreciation deduction is allowed or not is not relevant. You are "required" to claim it.