Question

Is there a typo in IRS Publication 925?

Forum|Forum|4 years ago
October 8, 2021
2 replies
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I have read and seen enough examples to think I understand the phaseout between $100,000 and $150,000 under this rule, so why does the phaseout language suggest you get zero allowance over $100,000?? -- is there a typo and the $100,000 figure at the end of the below quote should be $150,000? As it reads, it does not make sense to me.. Thanks!

"Phaseout rule. The maximum special allowance of $25,000 ($12,500 for married individuals filing separate returns and living apart at all times during the year) is reduced by 50% of the amount of your modified adjusted gross in- come that’s more than $100,000 ($50,000 if you’re married filing separately). If your modified adjusted gross income is $150,000 or more ($75,000 or more if you’re married filing separately), you generally can’t use the special allowance. This is because the special allowance is reduced to $0 since the modified adjusted gross income is over the $100,000 amount."

Critter-3

Looks like a typo ... refer to the form instead : https://www.irs.gov/pub/irs-pdf/f8582.pdf

M

Mike9241

definitely a typo. should be $150K. but you know that IRS publications have NO authoritative value even though we will often cite what they say. there was one couple that went by a PUB. The IRS said that's not what the Code said. They went to court. The IRS won and the taxpayers got hit with substantial penalties due to the extent of the underpayment.

R

redwoods778Author

Thank you for the responses Critter-3 and Mike9241! Form 8582 makes it clear $150,000 is the number. What is so strange is that I have a co-owner on a property and a CPA told them that their rental loss is entirely suspended because their AGI/MAGI is over $100,000 (at around $120,000).. and therefore they should not worry about the rental loss deduction and instead take more from their IRA to maximize the 24% tax bracket up to $163k. I'm confident this is wrong, but strange that the CPA and the IRS PUB both suggest the rental loss is suspended at $100k..

Critter-3

Is the friend filing separately ? From the form instructions:

If your modified adjusted gross income is more than $100,000 ($50,000 if married filing separately) but less than $150,000 ($75,000 if married filing separately), your special allowance is limited to 50% of the difference between $150,000 ($75,000 if married filing separately) and your modified adjusted
gross income.
Generally, if your modified adjusted gross income is $150,000 or more
($75,000 or more if married filing separately), there is no special allowance.

As far as the CPA ... if he uses a professional program that should have done it correctly unless it was overridden. Have the friend question it.