Excess Rental Expenses

Today TaxMama hears from Susan in the TaxQuips Forum, who tells us. “I have more rental expenses than income, so there’s a loss of $20,000. But I can’t use it to offset any of our income. Can I take the property tax and the mortgage interest that were on my rental house and add it to Schedule A for itemized deductions instead?”

Dear Susan,

That’s an interesting thought.

But I don’t think so.

This is rental property. If you can’t use the deduction this year, it does get “suspended” – and carried towards future years.In a year where you have income from that property, you will be able to use some or all of those suspended losses.

You will also be able to use the losses when you sell the property. They will be ordinary losses – which will reduce your regular income, like wages, business profits, etc.

You can read more about this in IRS Publication 527 – Residential Rental Income and Expenses. https://www.irs.gov/publications/p527/index.html

No doubt, some of our pros will tell you about mixed-use property – asking if this rental is part of your personal residence. I still don’t really see how that would allow you to move the property taxes and interest.

Good luck!

And remember, you can find answers to all kinds of questions about rental income, losses and other tax issues, free. Where? Where else? At TaxMama.com.

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IRS Publication 527 :: Residential Rental Income and Expenses.

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