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

As an active participant, Harvey can deduct up to $25,000 of rental losses against his ordinary income, subject to phase-out rules. However, since his AGI is $80,000, the $25,000 limit will be reduced by 50% of the excess or $2,500. Therefore, the maximum amount he can deduct against ordinary income is $22,500 ($25,000 - $2,500).

Harvey Rents His Second Home