Harvey rents his second home. During the year, Harvey reported a net loss of $35,000 from the rental. If Harvey is an active participant in the rental and his AGI is $80,000, how much of the loss can he deduct against ordinary income for the year?

Question

Quizplus · Accepted Answer

If the taxpayer is an active participant in the rental and their AGI is less than $100,000, they can deduct up to $25,000 of rental losses against their ordinary income. However, the amount of the deductible loss phases out by 50% of the amount by which the taxpayer's AGI exceeds $100,000. In this case, Harvey's AGI is $80,000, so he can deduct the full $35,000 loss against his ordinary income.

Harvey Rents His Second Home