I have a rental property in another state, and I own a condo that I live in in my state of residence. My rental condo has an annual loss, once depreciation is taken into account. I am not an active manager - I pay a property manager to look after the place as I am too far away. So my loss on the condo is passive.
My question is in 2 parts : am I right in thinking that not being an active manager makes my condo rental loss passive? And, if so, then does this mean that all the expenses that I incur on the rental - mortgage interest, repairs etc - are not tax deductible? Because if so, then the only way to make money on a rental is if it throws off a positive cash flow.
If my rental is a passive loss, can I put the rental mortgage interest in my personal itemized deductions? I guess thats 3 questions.
2007-03-27 11:46:10 · 3 answers · asked by ohmygod 1 in Business & Finance ➔ Renting & Real Estate
Check with a tax pro - I think your interpretation of passive may be incorrect. When you are totally at risk as you are I do not think hiring a local manager qualifies it as a passive activity.
2007-03-27 14:20:00 · answer #1 · answered by Roger C 5 · 0⤊ 0⤋
Cash flow and profit/loss are two entirely different beasts.
a) Your loss is passive since you're not an active manager of the property.
b) All the expenses you incur (including depreciation, management fees, mortgage interest on the rental, taxes on the rental, maintenance, etc) are expenses of your rental unit and contribute to the passive loss for that property.
c) You can deduct passive losses against your income, up to $25,000 in passive losses per year (from all passive income sources, not per property). You can carryover any excess passive loss to the next year.
2007-03-27 19:01:01 · answer #2 · answered by SndChaser 5 · 0⤊ 0⤋
good questions....i'm going to star this and check back later
2007-03-27 11:50:10 · answer #3 · answered by Cardinal Rule 3 · 0⤊ 0⤋