Myriah earns salary of $80,000 and $20,000 of dividend income from her stock portfolio this year.Myriah owns a passive activity from which she incurs a $10,000 loss.In addition,the passive activity has generated tax credits this year,and Myriah's share is $5,000.What portion of the $5,000 of tax credits can Myriah apply against her tax liability this year?

Question

Quizplus · Accepted Answer

Passive activity tax credits can only be used to offset tax liability generated by passive income. Since Myriah has a passive activity loss and no passive income, she cannot apply any of the $5,000 tax credits against her tax liability this year.

Myriah Earns Salary of $80,000 and $20,000 of Dividend Income