REI deductions with fulltime job pay

[Eric Nelson]

I just bought a triplex in Bemidji MN.  I work full time, my wife and I file jointly around $110k income.

The house cost $168,500.  If I have a negative cashflow on paper or IRL this year, will I decrease my taxable income from my full time job?

If so, Is there a pay bracket cutoff where you cannot anymore?

Examples, I make $110k, rental income is 25k, and I have 30k in deductions.  Will my taxable income go down to $105k, or does that extra deduction carry over until I have a positive year?

Thanks!

Eric Nelson

[Natalie Kolodij]

Hi Eric, 

Typically passive income/losses (rental income) can only be used to offset other passive income. 

HOWEVER 

There is a small tax payer exclusion that allows deduction of up to $25,000 annually of losses if you're under a certain AGI. 

The phaseout for this deduction begins at $100k for married couples and reduces the allowable loss  of $25,000 is reduce by 50% of the amount that your AGI exceeds $100k...until $150,000 at which point the loss is disallowed completely. 

This means that with a good tax professional and some tax planning you should be able to reduce your AGI to ensure you meet this allowable loss limitation.