Real estate taxes on a rental when you can't take the loss

[LCP]

Taxpayer makes too much money to benefit from the rental loss.

Must real estate taxes on the rental be shown on Schedule E? Why not Schedule A??

[gkaiseril]

They are a normal expense of the rental activity and associated with the real property being rented.

[LCP]

Simple as that huh??

What if it's only held out for rental only part of the year?

[RitaB]

I believe

I believe the real estate tax can be deducted on Sch A.

I know this is not the same, but I am working on a Sch E right now where the real estate tax will go to Sch A. (Expenses disallowed because of personal use.)

[gkaiseril]

If the taxpayer converted to business use or personal use during the year, then you need to allocate the re tax by months of use. Note that paying the RE taxes in arrears would have no affect on the calculation, except in the year of sale.

Losses in either case would not be deductible until the income fell, or the building was disposed of.

[AccTaxMan]

If the property is for rental, I think the property tax has to stay in Schedule E.

[ChEAr$]

If the property is for rental, I think the property tax has to stay in Schedule E.

Agree with previous poster.

[Bees Knees]

Taxpayer makes too much money to benefit from the rental loss.

Must real estate taxes on the rental be shown on Schedule E? Why not Schedule A??

Actually, technically real estate taxes could be deducted on Schedule A, even if the property is used for rental. The only requirement for real estate taxes to be deductible on Schedule A is that the taxpayer paid them, and the taxes were not properly allocated to another taxpayer (such as a buyer paying taxes owed by the seller).

However, that is irrelevant in your case. You said the taxpayer makes too much money to benefit from the rental loss. That means the loss is suspended under the passive activity loss rules. A passive loss is a passive loss, whether the activity is reported on Schedule E, Schedule A, Schedule C, Schedule F, or even on the front of the 1040 on line 21. Thus, even should you choose to deduct the taxes on Schedule A, they are still considered to be a passive activity deduction, subject to the passive loss limitation rules.

Remember, the passive activity loss limitation is calculated on Form 8582, not Schedule E. It does not matter what form you use to deduct the expenses. If the expense is for a passive activity, it flows to Form 8582.

[RitaB]

Dang

Just when I thought I had won, and you were coming to save the day and shine the light on my brilliance - you whipped me, too, Bees. Oww.

Nice job, BTW.

[Edsel]

Schedule A Trumps

This is quite similar to the discussion thread (Take ALL expenses) where a guy may elect to deduct home equity interest on Sch A instead of Sch C because it will lower his EIC.

Schedule A expenses are the "trump suit" as to allowability, in a choice between Sch A or any other usage. I believe this to be true in general for Property Taxes, Interest on Principal residence, and 2106 stuff. Also true if there is a choice between principal residence interest and investment interest on 4952.

Having said this, under normal and sane conditions, the taxpayer usually benefits more if they are deducted for business than for Sch A.

[BP.]

Schedule A expenses are the "trump suit" as to allowability, in a choice between Sch A or any other usage. I believe this to be true in general for Property Taxes, Interest on Principal residence, and 2106 stuff.

Well, this is interesting. Have a Schedule C client with a small in-home beauty salon.

The business loss this year made some of the OIH operating expenses carryforward to next year, with the business portion of the mortgage interest and real estate taxes fully deductible against the profits at that point. A better result would have been obtained with all interest & taxes going to the Schedule A, in order to shift more of the operating expenses into the currently deductible status, but based on the following instructions for the 8829, I didn't put the entire amounts on the Schedule A:

"If you itemize your deductions, be sure to claim only the personal portion of your deductible mortgage interest, qualified mortgage insurance premiums, and real estate taxes on Schedule A. For example, if your business percentage on line 7 is 30%, you can claim 70% of your deductible mortgage interest, qualified mortgage insurance premiums, and real estate taxes on Schedule A."