Rental Loss

[winning1906]

I materially participate in my rental Property.
My taxable Income is "Zero "
My Rental Loss eventually as no effect on my Federal Tax Due.
1). Is there a way to include my rental loss in my schedule C such that I can reduce my schedule C net profit in order to reduce my self employment tax?
2). If so, How? see #1.
3). If not, can I carry that loss forward?
4). If so, How? see #3.
5). If the options above do not work, should I treat as passive Active Loss carry forward?
6). If none of the above work, what is the best way to get all of the rental loss deduction?

[mellish7777 · Accepted solution]

Don't put the loss on SCH C because that would be wrong....it goes on SCH E....and the loss gets carried over unless you materially participate as a real estate professional. If you are a real estate pro and materially participate you can take advantage of the net loss which should then create a NOL for the year.

[Carl]

I materially participate in my rental Property.
My taxable Income is "Zero "

You mean your taxable *RENTAL* income is Zero.
My Rental Loss eventually as no effect on my Federal Tax Due.

That's exactly as expected. So long as the rental is 100% business use each year, you can fully expect to have ZERO taxable "RENTAL" income every single year.

Is there a way to include my rental loss in my schedule C

Nope.Rental income is passive, while your SCH C business income is non-passive. You can't use losses on one, to offset gains on the other.

As you can see, when you add up your allowed SCH E rental deductions of mortgage interest, property taxes and property insurance along with the depreciation you are required to take by law, your rental expenses will practically "ALWAYS" exceed your rental income. Add to that other allowed rental expenses, such as repairs and maintenance, and you're practically guaranteed to never have a taxable profit on rental property for as long as you own it.

The excess losses on rental property that exceed your rental income get carried over to the next year. This "carry over" will occur every year there is a loss on the rental, and the carry over amount will continue to increase with each and every passing year. You will not be able to actually realize and use those losses until the tax year you sell or otherwise dispose of the rental property.

In the year you sell the property, your carry over losses are used to offset any taxable gain you may realize on the sale. Just understand that the depreciation recapture has the potential to cancel out quite a bit *if not all* of those losses.

[winning1906]

Hi Carl, I appreciate the response.  I did mean taxable income... Line 43 of the 1040.