Harvey rents his second home. During 2016, 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 in 2016?

Question

Quizplus · Accepted Answer

Since Harvey is an active participant in the rental, he can deduct up to $25,000 of the rental loss against his ordinary income, which includes his AGI of $80,000. However, this deduction is limited based on his income. The deduction is phased out by 50% of the amount by which his AGI exceeds $100,000, and it is completely phased out when his AGI reaches $150,000 or more. Since his AGI is $80,000, he can deduct the full $25,000. Therefore, the correct answer is B.

Harvey Rents His Second Home