Partial rental of my home

[Cheryl9933]

I rent out the basement and 2 rooms in my house.  This is the first year of renting.  After I enter all the rental information, expenses and depreciation. I get a net loss of - 24,000.  But its telling me that none of it is deductible.  I can't figure out why none of it would be deductible.  is there an AGI limit because it is part of my main home? My AGI is >300K. My rental income $18,000. Rental usage is 50% of my home.

[Carl]

If you're AGI is over a threshold (not sure, but think $160K) then once you're rental losses get your rental income to zero, that's it. Any additional loss is just carried over to the next year. The carry over is shown on IRS Form 8852. With you're AGI in excess of $300K, you're over the threshold.

If you were under the threshold (and a few other requirements I don't recall at the moment) then up to a maximum of $25K would be allowed against other ordinary income.

[MinhT1]

Rental activity is a passive activity and passive activity losses are disallowed.

There is a special allowance of $25,000. If you or your spouse actively participated in a passive rental real estate activity, the amount of the passive activity loss that’s disallowed is decreased and you therefore can deduct up to $25,000 of loss from the activity from your nonpassive income.

There is a 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 income 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.

So the allowance is reduced to 0 for MAGI over $100,000 which is your case.

Please read this IRS document for more information.