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blaschp
New Member

If my rental property expenses exceeded my rental income should I not get a reduction in my overall taxes?

 
1 Reply
Carl
Level 15

If my rental property expenses exceeded my rental income should I not get a reduction in my overall taxes?

No, you should not. Rental income is passive. Therefore while you will claim all rental expenses, you can only deduct those expenses until they reduce your taxable passive income to zero. All expenses after that are carried over to next year and deducted, provided you have the passive rental income from which to deduct them.

With passive rental income, it is very common for your carry over losses to increase from year to year mainly because of the depreciation you are required to take by law. You don't "realize" those losses until the year you sell or otherwise dispose of the rental property.

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