When Can RE losses not be taken against ordinary W2 income?

[Karl Kauper]

My accountant stated, “The losses incurred on the rental properties cannot be taken and will be carried forward as your income exceeds $150k, thus no losses can be taken against your ordinary W2 income.”

I was really surprised by this. My wife and I had significant net losses on our Ohio property (mainly because of renovations) and a DE vacation rental, so I expected that these losses would help to offset some of our W2 income with respect to taxes (my wife and I both live and work in NJ). We own the Ohio property via an LLC and we own the DE property in our personal names (in case relevant). My accountant says No — the losses have to be carried forward. Is this accurate? I thought a major benefit of RE ownership is that any losses can offset other taxable income??

[Vicki X.]

Quote from @Karl Kauper:

My accountant stated, “The losses incurred on the rental properties cannot be taken and will be carried forward as your income exceeds $150k, thus no losses can be taken against your ordinary W2 income.”

I was really surprised by this. My wife and I had significant net losses on our Ohio property (mainly because of renovations) and a DE vacation rental, so I expected that these losses would help to offset some of our W2 income with respect to taxes (my wife and I both live and work in NJ). We own the Ohio property via an LLC and we own the DE property in our personal names (in case relevant). My accountant says No — the losses have to be carried forward. Is this accurate? I thought a major benefit of RE ownership is that any losses can offset other taxable income??

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Passive Activity Loss Rules