What is the limitations on rental house losses based on income, filing jointly.

[user77]

My income is over 150K and TT is not allwing my 23K rental property deduction.

[view2 · Accepted solution]

The amount of rental losses that you can write off is proportionately phased out between $100,000 and $150,000.  For example, if your adjusted gross income is $125,000, you can write off  $12,500 in rental losses in the year of the loss.  If you are an active participant and your adjusted gross income is $150,000 or more, you can write off no rental losses on your tax return in the year of the loss. 

When your adjusted gross income is $150,000 or more, you cannot write off any losses on your rental income. The amount of your loss sits in a separate account, and you can only write it off against your capital gains upon qualified sale of the rental property .(Sec. 469(g).

Under IRC § 469(g), current and carryforward passive activity losses are fully deductible in the year of an entire disposition in a fully taxable transaction to an unrelated party

[Carl]

That is correct. Because your income is to high, none of your passive losses are allowed. Instead, they are carried over to next year (shown on form 8582) where they will be deducted if your income is not to high of course. Overall though, if you have a mortgage on the property you can still expect your carry over losses to continue to accumulate and increase with each passing year. Thats because your passive losses can only be deducted from passive income. You can't "realize" the losses against other ordinary income until the year you sell or otherwise dispose of the property.

[Carlito11171]

I understand that if the taxpayer's income is too high, he cannot write off the loss, which sits in a separate account.  If the rental property isn't sold for another 6 six, does all the loss accumulate and then be used to offset capital gains upon the sale?

[Critter-3]

Yes the passive loses are cumulative (form 8582)  and are released upon the sale of the property on the Sch E not the Sch D which is more advantageous tax wise.

https://www.irs.gov/forms-pubs/about-form-8582