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I had a rental income along with my W2. Can I deduct the depreciation and expenses from the income to reduce my taxable income? If yes, which section?

Can I deduct depreciation of rental property from rental income? If yes, where?
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3 Replies

I had a rental income along with my W2. Can I deduct the depreciation and expenses from the income to reduce my taxable income? If yes, which section?

Ok ... on your personal return you will enter all the income from the W-2 and Sch E ( rental income/expenses including depreciation all go on the Sch E) and  IF you are not phased out any loss on the Sch E can reduce other income on the return.  Follow the interview screens carefully one at a time and the program will do all the calculations for you. 

Carl
Level 15

I had a rental income along with my W2. Can I deduct the depreciation and expenses from the income to reduce my taxable income? If yes, which section?

Can I deduct the depreciation and expenses from the income to reduce my taxable income?

No. Rental income is passive. It's not earned like your W-2 income is. Passive expenses can only be deducted from passive income, and that's it. Once your rental expenses gets your taxable rental income to zero (and it will) that's it. Any remaining expenses are just carried over to the next year.

Basically, in the very first year you enter the rental property into the TTX program you will see at an absolute minimum, the property itself listed in the Assets/Depreciation section. If not, then click the Add and Asset button and work it through to add the property itself. From that point on (if you enter everything correctly) the program will take care of the depreciation *for you* automatically, in the background with each passing year. That is of course, provided you import the data from the prior year tax file.

I had a rental income along with my W2. Can I deduct the depreciation and expenses from the income to reduce my taxable income? If yes, which section?


@Critter wrote:

IF you are not phased out any loss on the Sch E can reduce other income on the return. 


Information on the phaseout can be viewed at the link below. $25,000 is the amount of the special allowance (again, subject to phaseout) if you or your spouse actively participated in a passive rental activity (if you are married, filing a separate return, and lived apart from your spouse for the entire tax year, your special allowance is limited to a maximum of $12,500).

 

https://www.irs.gov/publications/p925#en_US_2018_publink1000104571

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