How much of a rental income loss can deduct towards ordinary income

I have a rental home that because of major issues I will have a large loss to the home. I actively manage the property. Rental income is 1550 per month and has been rented at this rate for the last 12 months. I make about 50 k a year not including rental income. My deductions towards the home are around 22,500 for this year. These items include, mortgage interest, monthly management fees, up keep and general maintenance activities, property taxes, etc... I have added in all applicable standard deductions without looking at anything frivolous. That DOES NOT include depreciation. Typically my expenses are not this high. My Heating and AC system went out and I had to replace it. I realize that the maximum for rental deductions is 25,000 a year if you actively manage the property at my income level.  I also am 100% the only owner of the home.

All that being said, How much of this 25,000 is deductible from my personal income. It seems that after adding in all these expenses it really does not change my tax return much.

I hate to say it, but at the end of the 2011 year with all these rental expenses I really only brought home 25,000 ordinary income. So should my tax liability be on the 25,000 or should it be 68,500 - 25000 = 43,000 tax liability on ordinary income

With all these deduction items i still have about 7,500 dollars worth of depreciation that I could apply towards the home. I have not depreciated the home since I began renting it in 2008. My depreciation is based upon the price of the home and the 27.5 year depreciation schedule. So, should I add in the depreciation for this year as well.

Beyond the normal here, but the reason I am asking is I have losses in the stock market that I can take by years end. I have about 5000 long term cap gains in divididends and interest for the year which is included in my 50k. I have about 6500 in losses that I can take on the year if i sell. This means I can apply 1500 of these losses to ordinary income. I am trying to look at scenarios to see if I should sell or not.

Please help. I can provide more details if needed.


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If you've used Turbo Tax in the past the amendment process is pretty easy.  

You tell Turbo Tax you want to amend a return, select the return to amend and save it with a name that will distinguish it from your amended return (e.g., add "as originally filed" to the name) and then go into the file and make any necessary changes.  When you're done you save the file again under a different name (e.g., add "as amended" to the original name), print out the Form 1040X ( that Turbo Tax prepares, print out any changed or added supporting information, and you're done.  Mail in the Form 1040X (separate envelope for each year) to the IRS.  If you live in a state with income tax Turbo Tax will allow you to amend the state return at the same time.

These articles
Amending Your Income Tax Return
Amend a Return

give you the gist of it and the detail.

Tom Young
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