Your rental income and expenses of rental operation are reported on Schedule E (1040). A depreciation expense is also taken on Schedule E. If you show a net loss (on paper) from your rental operations, you can use up to $25K in net losses to reduce your total taxable income.
The IRS has some publications which give greater details on rental property reporting and depreciation calculation.
What New Kid is saying is that if your net income from rental activities is in a loss position, that is, your schedule E shows a net taxable loss, you can deduct that loss on your tax return, up to $25,000.
Example:
Rent income - 10,000
Expenses (depreciation, insurance, taxes, etc) - 12,000
Net taxable loss - 2,000
You can deduct the 2,000 loss. If your loss is over 25,000, you can only deduct 25,000, and the rest would be carried forward to deduct against future taxable rent income.[ Edited by rentalman on Date 12/28/2004 ]
Are you currently investing in Germantown? I still have a rental unit in the Lakeview Condo complex on Shipley Terrace that I bought about six years ago.
Frederick has become overpriced for rental use, so I have to look elsewhere these days. Tried Montgomery Village and sold when the prices started to run up.
Hi, I'm a new Investor and was wondering how would I go about using properties I purchase on my Taxes. 
You need to tell us your investment strategy -- buy and hold for rental income, or buy to flip for profit.
Your strategy determines how you report the income from your properties on your tax returns.
:-? Hi, I didn't think about that -- I'm going to rent through HUD. Thanks so much for helping
So, you are going to be a landlord.
Your rental income and expenses of rental operation are reported on Schedule E (1040). A depreciation expense is also taken on Schedule E. If you show a net loss (on paper) from your rental operations, you can use up to $25K in net losses to reduce your total taxable income.
The IRS has some publications which give greater details on rental property reporting and depreciation calculation.
Thanks, I appreciate your help
New Kid,
Is that 25K deduction on all income or just income generated through renting or that business practice?
In other words, do I have to make 25K in rental income to deduct up to 25K in expenses?[ Edited by egbenj on Date 12/28/2004 ]
What New Kid is saying is that if your net income from rental activities is in a loss position, that is, your schedule E shows a net taxable loss, you can deduct that loss on your tax return, up to $25,000.
Example:
Rent income - 10,000
Expenses (depreciation, insurance, taxes, etc) - 12,000
Net taxable loss - 2,000
You can deduct the 2,000 loss. If your loss is over 25,000, you can only deduct 25,000, and the rest would be carried forward to deduct against future taxable rent income.[ Edited by rentalman on Date 12/28/2004 ]
egbenj,
rentalman is right on the money.
Are you currently investing in Germantown? I still have a rental unit in the Lakeview Condo complex on Shipley Terrace that I bought about six years ago.
Frederick has become overpriced for rental use, so I have to look elsewhere these days. Tried Montgomery Village and sold when the prices started to run up.
Eligible for $25k loss if less than $100k modAGI I think...phased out to $150k. See IRS Pub 527.