All Things Tax

All Things Tax

Like the title says, from the filing process and tax questions to tax policy and reform, you can search and share All Things Tax here. This is the place to find answers to all your general questions that don't fall under the other categories. And just a reminder: questions about software or online filing should be posted in DIY Products.

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Esteemed Pioneer
Posts: 11
Registered: ‎12-16-2015

Is $25k to Maximum Loss for the Life of an Active Participation Rental Property?

 Does Rental Loss Amortization/Depreciation Max out forever?

If you actively participate in a rental and are planning on keeping the rental for a few more year I was told that when the home is sold (which will happen eventually), we will get this loss back at that time.

 

1) How does that work?

2) If you have maxxed out at the $25k loss limit for active participation is $25k the total amount you can claim as a loss for the entire ownership of the rental? If you kept it for 5 years and had a $18k loss each year ($90k) do you only get back $25k of a loss when you sell it and you lose the rest? 

 

Thanks!

Trusted Council Member
Posts: 6,191
Registered: ‎02-23-2016

Re: Is $25k to Maximum Loss for the Life of an Active Participation Rental Property?

Hi Holly2,

 

If you actively participate in the rental activity you can take up to a $25,000 loss per year on Schedule E.

 

Selling the property is different.  If you have a loss on the sale then whatever the loss on the sale is will be a part of your gains/losses on Schedule D.  When you have a loss on a sale capital gains are offset first, and then up to $3,000 is deducted on Form 1040.  Anything left over carries to the next year and the same procedure is gone through again.

 

If you have any other questions then as always I'll be glad to help.

 

Louis,

Senior Tax Advisor (Tampa, FL)

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Esteemed Pioneer
Posts: 11
Registered: ‎12-16-2015

Re: Is $25k to Maximum Loss for the Life of an Active Participation Rental Property?

Something does not make sense. My first post asked if there is a reason why a second year loss on an out of state property ( we have no income in the state except the rental property) maxes out because the loss the first year was -$18k and this year when the program carries over the loss ( it's -$21k fro 2016) it's only reflecting a loss of -$3k in the North Carolina non-resident form.

 

I'm interpreting your most recent response to mean you are allowed a loss of -$25k EACH YEAR from the property. I guess my question is the same then. Why is the loss on the North Carolina form only showing up as -$3k if I'm allowed -$25k per year. Shouldn't it be showing -$39k as an accumulated loss? If you are allowed -$25k each year I would think it would keep adding the accumulated loss to the North Carolina form and show -$21k as a loss this year and last year's unallowed passive loss at -$18k.

 

Please advise.