Carey, a single taxpayer, purchased a rental house in 2016, which he actively manages. During 2016, Carey had a loss of $14,000 from the rental house. If Carey's adjusted gross income for 2016 is $138,000 before the rental loss, what is the amount of Carey's allowable deduction for the rental activity for 2016?

Question

Quizplus · Accepted Answer

As an actively managing single taxpayer, Carey is allowed to deduct up to $25,000 of losses from his rental activity against his other income, subject to a phase-out once his AGI exceeds $100,000.

Since Carey's AGI is $138,000 and exceeds the phase-out range, his allowable deduction is reduced by 50 cents for every dollar of AGI over $100,000. Thus, his allowable deduction is calculated as follows:

$25,000 - (($138,000 - $100,000) x 0.5) - $14,000 = $6,000

Carey, a Single Taxpayer, Purchased a Rental House in 2016