My W2 income plus state tax return added up to just over $150K. Why did my losses on my rental property (passive activity) not reduce my adjusted gross income?

[npierson7]

You cannot offset your ordinary income with your passive losses because your adjusted gross income is too high.

Losses from rental property are considered passive losses and can generally offset passive income only; if these passive losses exceed your passive income, they are suspended and carried forward indefinitely until future years, when you either have passive income or sell a property at a gain.

Under the passive activity rules you can deduct up to $25,000 in passive losses against your ordinary income (W-2 wages) if your modified adjusted gross income (MAGI) is $100,000 or less. 

This deduction phases out $1 for every $2 of MAGI above $100,000 until $150,000 when it is completely phased out.