What Rental Property Related Losses Are Still Available After $150k In Adjusted Gross Income?
I just had an interesting conversation with a friend of mine. He and his wife made 180k in W2 wages this year. They have one rental property with 14k in expenses (interest, travel, insurance, taxes, etc) and 3k in depreciation.
His Turbo Tax is telling him because his income is over 150k, he can not take ANY of the write offs.
It has always been my impression that regardless of your AGI you could write off interest, travel, taxes, etc.
What say you?
Many thanks, Brian
[ Edited by edmeyer on Date 02/07/2008 ]
Not to Hi-jack this thread – but my question is very much related. I am in a very similar (exact, really) situation and I am wondering what options I might have to reduce the adjusted gross column? I thought of getting an IRA but I learned that this will not help because these also have income limits. Are there other options to reduce the adjusted gross so that rental losses can be used to off-set W2 income?
My employer also offers a deferred compensation program. I can put up to $15,500 of my pay into this account each year and it shows up as box 12b on my W2. Would maximizing this account in effect reduce my W2 and therefore reduce my adjusted gross income? Does anyone know? Thanks.
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On 2008-03-06 12:13, jasons wrote:
Not to Hi-jack this thread – but my question is very much related. I am in a very similar (exact, really) situation and I am wondering what options I might have to reduce the adjusted gross column? I thought of getting an IRA but I learned that this will not help because these also have income limits. Are there other options to reduce the adjusted gross so that rental losses can be used to off-set W2 income?
One thing you could do is buy another rental property that produces positive income. This can be combined with your rental loss property if you elect to do so. If you have enough positive to offset the negative, this problem goes away.
With regards to your deferred pay issue - your AGI would decrease IF the deductions for the deferred comp plan are taken from your check on a pre-tax basis (check with your employer).
Hi Finniganps,
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One thing you could do is buy another rental property that produces positive income. This can be combined with your rental loss property if you elect to do so. If you have enough positive to offset the negative, this problem goes away.
With regards to your deferred pay issue - your AGI would decrease IF the deductions for the deferred comp plan are taken from your check on a pre-tax basis (check with your employer).
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It has been my experience that any new purchase of a rental property with a full mortgage and a full depreciation schedule will always show a paper loss. Maybe this is just the properties in my area???
Thanks for the info on the deferred comp. I believe this is correct and it is taken out of my pay check on a pre-tax basis. This should help to lower my AGI. I do not think it will be enough, though, to get below the $150K threshold. Any idea if they will be raising this cap? Seems pretty low in this day and age.
Hi Chris,
I get and respect what your are saying. However, I do not consider myself to be "rich" and this is what the tax code seems to infer by having this cap set at $150K. We are a young professional couple living in the mid-west where wages are low. I am sure that the bulk of professionals on the east coast and west coast earn 2-3 times this.
I would think that the government would want to encourage RE investment but by having this cap set so low it is not encouraging further investment by me. My guess is that it has probably been set at this for years. Does anyone know how long this has been set at $150K? It should increase as salaries increase, IMO.
i wanted to say thanks to everyone for responding. i have sent my friend a copy of the thread.
brian