Michelle is an active participant in the rental condominium property she owns. During the year, the property generates a ($15,000)loss; however, Michelle has sufficient tax basis and at-risk amounts to absorb the loss. If Michelle has $115,000 of salary, $10,000 of long-term capital gains, $3,000 of dividends, and no additional sources of income or deductions, how much loss can Michelle deduct?

Question

Quizplus · Accepted Answer

Michelle can deduct up to $25,000 of rental real estate losses against non-passive income if she actively participates and her AGI is below $100,000. Her AGI is $128,000, so she can deduct $25,000 - 50% of ($128,000 - $100,000) = $11,000.

Michelle Is an Active Participant in the Rental Condominium Property