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redwoods778
Level 2

Is there a typo in IRS Publication 925?

I have read and seen enough examples to think I understand the phaseout between $100,000 and $150,000 under this rule, so why does the phaseout language suggest you get zero allowance over $100,000?? -- is there a typo and the $100,000 figure at the end of the below quote should be $150,000? As it reads, it does not make sense to me.. Thanks!

 

"Phaseout rule. The maximum special allowance of $25,000 ($12,500 for married individuals filing separate returns and living apart at all times during the year) is reduced by 50% of the amount of your modified adjusted gross in- come that’s more than $100,000 ($50,000 if you’re married filing separately). If your modified adjusted gross income is $150,000 or more ($75,000 or more if you’re married filing separately), you generally can’t use the special allowance. This is because the special allowance is reduced to $0 since the modified adjusted gross income is over the $100,000 amount."

5 Replies
Critter-3
Level 15

Is there a typo in IRS Publication 925?

Looks like a typo ... refer to the form instead :  https://www.irs.gov/pub/irs-pdf/f8582.pdf

Mike9241
Level 15

Is there a typo in IRS Publication 925?

definitely a typo. should be $150K.  but you know that IRS publications have NO authoritative value even though we will often cite what they say.    there was one couple that went by a PUB. The IRS said that's not what the Code said. They went to court. The IRS won and the taxpayers got hit with substantial penalties due to the extent of the underpayment.

 

redwoods778
Level 2

Is there a typo in IRS Publication 925?

Thank you for the responses Critter-3 and Mike9241! Form 8582 makes it clear $150,000 is the number. What is so strange is that I have a co-owner on a property and a CPA told them that their rental loss is entirely suspended because their AGI/MAGI is over $100,000 (at around $120,000).. and therefore they should not worry about the rental loss deduction and instead take more from their IRA to maximize the 24% tax bracket up to $163k. I'm confident this is wrong, but strange that the CPA and the IRS PUB both suggest the rental loss is suspended at $100k..

Critter-3
Level 15

Is there a typo in IRS Publication 925?

Is the friend filing separately ?   From the form instructions:

 

If your modified adjusted gross income is more than $100,000 ($50,000 if married filing separately) but less than $150,000 ($75,000 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 modified adjusted
gross income.
Generally, if your modified adjusted gross income is $150,000 or more
($75,000 or more if married filing separately), there is no special allowance.

 

 

As far as the CPA ... if he uses a professional program that should have done it correctly unless it was overridden.  Have the friend question it.  

redwoods778
Level 2

Is there a typo in IRS Publication 925?

The property co-owner is an unmarried individual of retirement age. The purpose of the conversation with the CPA was to determine if the rental property would create any kind of deduction for her, and whether it might make sense to limit her IRA withdraw to the RMD, or take more than the RMD to maximize the 24% bracket. CPA told her she gets no deduction because any loss is suspended over $100k (I think he just made an error on this, as the phase out is between $100k and $150k). He did not input this into tax prep program, although I wish he would have. Appears to me she has a reason to try to limit her income so as to maximize the "special allowance" deduction of $25,000 under the PAL rules, but this is all new to me and these rules for mixed short term rental/personal use properties are pretty darn complicated.. thanks for your response!

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