Rental and Royalty Income - Your Profit or Loss Results

Forum|Forum|3 years ago
March 31, 2023
1 reply
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Hello,

I just about completed my rental expenses. The total profits were X and the deductible losses were -X which amounted to ZERO. What does "What you will see on your 1040 at this point: zero" means? Does this mean I am not able to deduct anything? see screenshot :

mglauner

Make sure in the Property Profile section under Rental Income, that you indicated that you 'actively participate' in the Rental. If not, this will limit your ability to deduct Rental Loss.

Also indicate that you 'rented all year' (while available for rent) and was rented 'at a fair price'.

Here's more info on Deducting Rental Losses.

@chapinreyes

chapinreyesAuthor

Hi MarilynG1

Is this what you mean? and I double checked what you mentioned:

the one checked was automatically imported i guess because I did not check it.

But my question was more in relation to how the profits and the losses amounted to ZERO. I was trying to understand what this means.

JulieS

If your net profit or loss is zero, either your rental income and deductions were equal and this netted to zero, or your loss is considered to be a passive loss and therefore, not deductible.

Rental activity is considered passive income, but there is an exception to that rule that allows some taxpayers to deduct their losses.

If you actively participated in a passive rental real estate activity, you may be able to deduct up to $25,000 of loss from the activity from your non-passive income.

If your Modified Adjusted Gross Income (MAGI) is

$100,000 or less ($50,000 or less if married filing separately), you can deduct your loss up to $25,000.
If your MAGI is more than $100,000 (more than $50,000 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 MAGI.
Generally, if your MAGI is $150,000 or more ($75,000 or more if you are married filing separately), there is no special allowance.

There is also an exception for real estate professionals.

If you have a loss you can't deduct because it is passive, the loss carries forward until you have enough passive income to use it, or you sell the property.

This is helpful when you sell your rental, all those un-allowed losses can offset your gains from selling.

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