Without having the ability to look at your return, there are a couple of possibilities that I can suggest:
- Your income is within the income limits that phaseout your allowable rental loss deduction
- You did not indicate that you either a.) owned at least 10% of the property, or b.) you made managment decisions.
Income Limitation:
Modified adjusted gross income limitation.
If your modified adjusted gross income (see the instructions for line 7, later) is $100,000 or less ($50,000 or less if married filing separately), your loss is deductible up to the amount of the maximum special allowance referred to in the preceding paragraph.
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.
Ownership and Management Rule:
Rental losses are passive losses and would ordinarily be disallowed. However, there is a special allowance for active real estate rental properties that allows taxpayers to deduct as much as 25,000 dollars if the following applies:
- You own at least 10% of the property.\
- You make meaningful management decisions or arranged for others to provide services (such as repairs) in a significant and bona fide sense. Management decisions that may count as active participation include:
- Approving new tenants,
- Deciding on rental terms,
- Approving capital or repair expenditures, and
- Other similar decisions.
