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Mom and Pop own a home they rent out to students at the local university. Their...

Mom and Pop own a home they rent out to students at the local university. Their AGI before considering any income or loss from the rental property is $110,000. Their loss from the rental property for the current year is $26,258.

If Mom and Pop have no other sources of passive income, how much of the passive loss from the rental home can they deduct currently?   If none, answer 0.
Please explain how you got each number in your solution and/or where the number comes from.

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Answer #1

Answer:' $20,000

However, their ability to deduct these losses phases out by 50 cents for every dollar of AGI they earn above $100,000. Once their AGI hits $150,000 they will no longer be able to deduct the loss from their rental property unless they have passive income from another source.

Given Mom and Pop had $110,000 of AGI (excluding the rental loss), they lose $.50 of the $25000 potential deduction for every dollar by which AGI exceeds $100,000:
($110,000 - $100,000)* .50 = $5,000;
This leaves a potential deductible loss of $20000 ($25000- $5000).

So, M&P can deduct $20000 currently

Nite:- they will carry forward the remaining $6258

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