Posts filed under the Rental Income and Passive Loss Rules category.

Passive Loss Rules

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Losses on Rental Property
When your expenses from a rental property exceed your rental income, your property produces a net loss. This situation often occurs when you have mortgage interest, depreciation deduction and cash expenses. The IRS has limit the loss deduction.
Passive Loss Rules
Property rental is a passive activity and subject to IRS passive activity loss rules. When you incur a real estate rental loss, the IRS considers the loss passive unless property management is your primary income-earning activity.

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Depreciation of Rental Property

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Depreciation is a deduction to your income that allows you to recover the cost or other basis of property over the expected life of the property. It is an allowance for wear and tear or obsolescence of the property. In reality, the value of real estate property may not decrease at it allowed. So you get benefits by using depreciation against rental income and keep the property value at the same time. Keep in mind that depreciation is mandatory.

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