[MustPass1988]

I know that if a house is rented more than 14 days and personal use is not more than 15 days or 10% of number of days rented, then rental income is included and rental expenses are deducted to the extent of rental income. However, it says that “expenses in excess of income are subject to the passive activity loss limits”, rather than carrying forward any unused deductions like you would if personal use were MORE than 15 days. Can someone explain what that means?

AUD: PASSED [81]; Expired, retaking August 23rd
BEC: PASSED [83]; Expired, retaking July 11th
REG: PASSED [83]
FAR: FAILED [64]; Retaking May 23rd

[Anonymous]

@MustPass1988

The rule to consider it a rental property is 15 days or more of rentals, and personal use is not more than 14 days or 10% of number of days rented. As for the passive loss limits, passive loss activity is limited to passive loss income, with the excess carried forward until used. There is no passive activity is the property is deemed for personal use (i.e., rented for <15 days), so none of the loss may offset passive activity income (and none of the income is included as passive activity income)

There is an exception called the Mom and Pop Exception. The taxpayer may deduct up to $25,000/ year of net passive losses attributable to rental real estate annually if the individual actively participates/manages and own more than 10% of the rental activity

Did that help? If not, let me what else you need help with

[MustPass1988]

Thanks, that helps me. Rogers doesn't really mention the Mom & Pop exception but I knew that there was the active rental loss deduction of $25,000 so it was confusing me.

AUD: PASSED [81]; Expired, retaking August 23rd
BEC: PASSED [83]; Expired, retaking July 11th
REG: PASSED [83]
FAR: FAILED [64]; Retaking May 23rd

[Author]

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