Question

Billy Ray owns several parcels of rental real estate, and he actively participates in managing the properties. His total loss from these activities in 2019 is $30,000. Assuming that his AGI for 2019 is $110,000, what is the allowable deduction from these properties in 2019

Answer 1

Answer:

$20,000

Explanation:

Normally if you actively participate you can write off upto $25,000 of your rental loss.

However this phases out for income over $100,000 and is reduced by 50% of the excess income over $100,000.

So (110,000-100,000) × 0.5 which is $5,000 will be reduced from $25,000 to determine the maximum loss that will be allowed which is $20,000.