Rental expenses and depreciation

[ecb2020]

We started renting out our "former house" in 2019. I added the house as an asset, then added various improvements that were done to the house over the years in order to get depreciation.  After entering rental income ($9000 for the year) Turbo Tax Premier shows we had a $50,000+ loss but it did not decrease the amount of tax owed. After looking around at various publications I found something that said if your income is over $150K you cannot take the loss.  It looks like we only get expense deductions equal to the $9000 rental income, but nothing more. Is that right?

[AmeliesUncle]

Yes, that is right.  HOWEVER, if the program is saying you have a $50,000+ loss in only ONE year, something seems really wrong.   You should review your entries.

[AmyC · Accepted solution]

When you enter the cost basis to depreciate the house, that includes all of your remodeling before renting the house. You have the house as one entry to depreciate. See Publication 946, How to Depreciate Property and  About Form 4562, Depreciation and Amortization.

Yes, income over $150,000 is limited and you can carryover your losses until your income is lower or you sell the house. 

Here are the full rules from the IRS for Rental Income and Expenses and Instructions for Schedule E (Form 1040)

Related:

• IRS Interactive Tax Assistant for rental expenses.
• IRS Pub 527 for Rental Property

[ecb2020]

Thank you for your reply. I did want clarification on one item: when you say "you have the house as one entry" are you saying I should only have 1 entry for the house plus all improvements made over the years before we started to rent it? I listed the house as 1 entry, new roof as separate entry, new fences as separate entry, etc. Thank you very much!