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Rental and Depreciation questions

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  • Rental and Depreciation questions


    Thanks in advance for any advice

    I have several questions regarding my rental property that I purchased and
    placed into service in Jan 2003

    My understanding is since my AGI is over $150K that I cannot deduct any loss
    on the rental property from my wage income even though I actively manage the
    property. With this in mind I am looking for advice on Depreciation of the
    Rental

    For 2003 Tax Year (this is what I did)
    * The Expenses for the rental are greater than the Rent received (but no
    loss allowed since AGI)
    * I still depreciated the Rental on my 2003 Fed Tax Return (but no loss
    allowed since AGI)
    * I actively manage the rental property
    * Since my AGI was over $150K I was not allowed to deduct any losses against
    my wages


    For 2004 Tax Year (this is what I am thinking)
    * The Expenses for the rental are less than the Rent received in 2003
    * I continued to depreciate the rental and Depreciation from 2004 and the
    Expenses are greater than the Rent received (but not loss allowed since AGI)
    * I actively manage the rental property
    * Since my AGI was over $150K I was not allowed to deduct any losses against
    my wages

    For the questions below please consider points:
    * The 2003 Depreciation although calculated could never be used (i.e. I did
    not benefit from it)
    * Part of the 2004 Depreciation calculated could never be used (only part of
    it was used to offset Rental income)

    1) I know the cost basis of your property is reduced by the depreciated
    amount when you sell it. Is the basis reduced by the depreciation amount
    you could actually used? Or is the entire depreciation amount used
    regardless if you benefited or not?

    2) In general when you sell a rental property is depreciation assumed even
    if you don't claim it on your tax return? Can I stop claiming it on my
    return so I don't have to consider it when I sell?

    3) Is there any way to use or carry forward Depreciation that was not used
    in 2003 and 2004? I am thinking if I pay off the loan I could use more of
    the depreciation to offset the rental income.

    Thanks again!!!






  • #2
    Rental and Depreciation questions

    <Rental unit shows a loss, but OP is unable to take it since AGI is over
    $150K>
    * The 2003 Depreciation although calculated could never be used (i.e. I did not benefit from it)
    Partially correct - you could not take it yet, but you will eventually.
    * Part of the 2004 Depreciation calculated could never be used (only part of it was used to offset Rental income)
    Same.
    1) I know the cost basis of your property is reduced by the depreciated amount when you sell it. Is the basis reduced by the depreciation amount you could actually used? Or is the entire depreciation amount used regardless if you benefited or not?
    Entire depreciation.
    2) In general when you sell a rental property is depreciation assumed even if you don't claim it on your tax return? Can I stop claiming it on my return so I don't have to consider it when I sell?
    Entire depreciation that could/should have been claimed.
    3) Is there any way to use or carry forward Depreciation that was not used in 2003 and 2004?
    Ta da! The loss that you cannot claim each year because your AGI is too
    high IS carried over to the subsequent years. This includes not only the
    portion of the loss caused by depreciation, but also loss caused by
    vacancies, repairs, etc. It can offset any gain that you do have, be
    (partially) used in a year where your AGI allows it, or be claimed in full
    in the year you sell the property. (Apparently Pub 925 discusses this in
    detail.)

    --
    Don EA in Upstate NY


    Comment


    • #3
      Rental and Depreciation questions

      Thank-you, Thank-you, Thank-you

      I glanced at Pub 925 this has to do with Passive Activity and At-Risk Rules
      .... is this what you were thinking?


      "Don Priebe" <[email protected]> wrote in message
      news:[email protected] link.net...
      <Rental unit shows a loss, but OP is unable to take it since AGI is over $150K>
      * The 2003 Depreciation although calculated could never be used (i.e. I did not benefit from it)
      Partially correct - you could not take it yet, but you will eventually.
      * Part of the 2004 Depreciation calculated could never be used (only part of it was used to offset Rental income)
      Same.
      1) I know the cost basis of your property is reduced by the depreciated amount when you sell it. Is the basis reduced by the depreciation amount you could actually used? Or is the entire depreciation amount used regardless if you benefited or not?
      Entire depreciation.
      2) In general when you sell a rental property is depreciation assumed even if you don't claim it on your tax return? Can I stop claiming it on my return so I don't have to consider it when I sell?
      Entire depreciation that could/should have been claimed.
      3) Is there any way to use or carry forward Depreciation that was not used in 2003 and 2004?
      Ta da! The loss that you cannot claim each year because your AGI is too high IS carried over to the subsequent years. This includes not only the portion of the loss caused by depreciation, but also loss caused by vacancies, repairs, etc. It can offset any gain that you do have, be (partially) used in a year where your AGI allows it, or be claimed in full in the year you sell the property. (Apparently Pub 925 discusses this in detail.) -- Don EA in Upstate NY

      Comment


      • #4
        Rental and Depreciation questions

        Sorry ... I am slow. I think your reference is correct.


        "news.east.earthlink.net" <[email protected]> wrote in message
        news:[email protected] link.net...
        Thank-you, Thank-you, Thank-you I glanced at Pub 925 this has to do with Passive Activity and At-Risk Rules ... is this what you were thinking? "Don Priebe" <[email protected]> wrote in message news:[email protected] link.net...
        <Rental unit shows a loss, but OP is unable to take it since AGI is over $150K>
        * The 2003 Depreciation although calculated could never be used (i.e. I did not benefit from it)
        Partially correct - you could not take it yet, but you will eventually.
        * Part of the 2004 Depreciation calculated could never be used (only part of it was used to offset Rental income)
        Same.
        1) I know the cost basis of your property is reduced by the depreciated amount when you sell it. Is the basis reduced by the depreciation amount you could actually used? Or is the entire depreciation amount used regardless if you benefited or not?
        Entire depreciation.
        2) In general when you sell a rental property is depreciation assumed even if you don't claim it on your tax return? Can I stop claiming it on my return so I don't have to consider it when I sell?
        Entire depreciation that could/should have been claimed.
        3) Is there any way to use or carry forward Depreciation that was not used in 2003 and 2004?
        Ta da! The loss that you cannot claim each year because your AGI is too high IS carried over to the subsequent years. This includes not only the portion of the loss caused by depreciation, but also loss caused by vacancies, repairs, etc. It can offset any gain that you do have, be (partially) used in a year where your AGI allows it, or be claimed in full in the year you sell the property. (Apparently Pub 925 discusses this in detail.) -- Don EA in Upstate NY

        Comment

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