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Question

In 2013 and 2014 Andy, who is single owned a vacation home that generated both income and related expenses as listed below. Andy’s only other income is W2 wages of $276,000

YEAR  INCOME   Ad Valorem Taxes      Management fees
2013  $35,000    $9,500                      $29,000
2014  $32,000     $9,500                    $29,000


Andy has no other expenses that would be allowed as deductions either for or from AGI. How much of the MANGAGEMENT FESS (after all limitations) can Andy deduct in 2013? Andy
In 2013 FOR AGI______ FROM AGI__________ CARRYOVER________

Answer 1

This is a tax question and it involves passive income or loss from investment activities such as real state investment.

 

The passive activity loss rules create a separate "tax basket" for passive activities. Within this basket, losses and gains from different passive activities are "netted" against each other. If the losses and gains (including carry forward suspended losses) net to overall income, the income is included with wage and portfolio income in total taxable income. If the losses and gains net to an overall loss, the loss is suspended and carried forward until passive income is recognized in future years or the activities are sold or go out of existence.

 

Active participants in a rental real estate activity may deduct up to $25,000 of these losses against other income, including wages and portfolio income. The full $25,000 allowance is available only if your adjusted gross income does not exceed $100,000. The allowance is reduced by $.50 for each dollar of adjusted gross income over 100,000 and is completely phased out if adjusted gross income exceeds $150,000.

The question I have is the W2 wages of $276,000 for the year 2013 only? If the W2 belongs to 2013, then the allowable deduction under IRS does not apply.