Harvey rents his second home.During 2013,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 2013?

Question

Quizplus · Accepted Answer

The maximum amount that an active participant in rental real estate can deduct against ordinary income is $25,000 if their AGI is $100,000 or less. However, this deduction is phased out for AGIs between $100,000 and $150,000. Since Harvey's AGI is $80,000, he can deduct up to the full amount of the rental loss, which is $35,000, minus the $10,000 phase-out ($100,000 - $80,000 = $20,000 * 50% = $10,000). Therefore, $35,000 - $10,000 = $25,000.

Harvey Rents His Second Home