Rental Property/Schedule E

[TheGoodnShawn]

Good Morning Boardess....(SMILE)

I was looking over some of my own personal tax dealings last night, and I had a few questions.


I bought a second (investment property) home last June. I was not able to get anyone into the home until July. I received rents in August, but none in August, Sept, Oct, and part of Nov. The eviction was finalized in the middle of November.

I wanted to right off the loss of the 4 months, but to my understanding this is an passive activity allowing me to only right off the one months rent.

Is this the case even though it was a true loss, seeing that I still had a mortgage to pay?

I think I bit off more than I could chew when I decided to do rentals....LOL, more headaches more problems.....LOL

Thanks

[TMI Moderator]

Good Morning Boardess....(SMILE)

I was looking over some of my own personal tax dealings last night, and I had a few questions.


I bought a second (investment property) home last June. I was not able to get anyone into the home until July. I received rents in August, but none in August, Sept, Oct, and part of Nov. The eviction was finalized in the middle of November.

I wanted to right off the loss of the 4 months, but to my understanding this is an passive activity allowing me to only right off the one months rent.

Is this the case even though it was a true loss, seeing that I still had a mortgage to pay?

I think I bit off more than I could chew when I decided to do rentals....LOL, more headaches more problems.....LOL

Thanks

Page 7-12 of TheTaxBook states the following:

"If the taxpayer or spouse actively participated in a passive rental real estate activity, a loss deduction of up to $25,000 is allowed against nonpassive income if certain requirements are met..."

The special allowance phases out if your income is more than $100,000 ($50,000 MFS).

[TheGoodnShawn]

Thanks

Mr. Roberts,

Thanks, I actually read that exact passage before posting.

Shawn

[DaveO]

Just complete the Schedule E

Enter the rent received and the expenses incurred. No seperate deduction is allowed for rent owed but not received. I don't know if that was your question but it's one I hear from my clients quite often.

[TheGoodnShawn]

Thanks Dave

I appreciate your response


Shawn

[jainen]

Landlording is a lousy job

>>I bit off more than I could chew when I decided to do rentals<<

Landlording is a lousy job. Turn it over to a property manager. He'll skim off any profits, but at least the bills will get paid and the plumbing will work. Unfortunately, if you paid too much he can't help with the cash flow for servicing your mortgage.

Plan to do a 1031 exchange later this year. Get into a full or partial interest in a small strip mall with triple-net leases.