Today TaxMama hears from Betty in Arizona, with this question. “ I realized that I didn’t deduct depreciation at all in my past 8 years tax returns. So I will use Form 3115 to capture all the depreciation.
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But this will create a big loss on Schedule E. Is this loss limited by Form 8582 for the total loss on rental of ,000?
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”
Dear Betty,
How astute of you to realize that you can use Form 3115 to catch up on all the unused depreciation.
https://answers.google.com/answers/threadview/id/499620.html
Sadly yes, your Schedule E rental property deductions will be limited to $25,000 per year.
But don’t despair! All is not lost. The suspended losses will still be there for you to use when the property starts showing profits.
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And if there are still suspended losses sitting there, when you sell the property you will be able to offset the gain with these losses – even if you sell the property at a loss. In fact, you can use up these losses each year, to bring you to the $25,000 loss level.
You can read more about Passive Loss rules in IRS Publication 925.
https://www.irs.gov/publications/p925/index.html
And remember, you can find answers to all kinds of questions about special tax loopholes and other tax issues, free. Where? Where else? At TaxMama.com.
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