What type of income can depreciation offset

Forum|Forum|2 years ago
September 26, 2023
2 replies
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If you have a passive loss after depreciation, does that loss offset excess capital gain on sale of a primary residence, or does it carry forward to passive income in the following year?

Thanks

Not A Product Question

Anonymous_

Employee

@cindi11 wrote:

....does it carry forward to passive income in the following year?

It carries forward to the following year (and beyond until offset).

Generally, passive activity losses cannot be used to offset capital gains.

Mike9241

depends on the activity from which the passive loss arose and if it was real estate then your adjusted gross income. SEE FORM 8582. other than real estate passive losses are suspended until the activity is disposed of.

for real estate with active participation passive losses single individuals and joint filers can be allowed a passive loss of to up to $25,000 if their AGI Is $150K or less. the lesser of a) $25K or b) 50% of the result when $150K is reduced by modified adjusted gross income

cindi11Author

AGI will be high with the capital gains from sale of home. So all RE passive losses would carry forward to passive RE gains in future years?

Anonymous_

Employee

@cindi11 wrote:

AGI will be high with the capital gains from sale of home. So all RE passive losses would carry forward to passive RE gains in future years?

Yes, there will be a carryforward to future years to be used to offset passive income and, ultimately, gain on the sale of the rental property.