Let's say there is a person who had passive losses on rental real estate. According to Form 8582 this person is allowed to deduct all the rental losses because his income is low and the losses are less than $25,000. But let's say this person's income is NOT so low that he has no tax liability. He could benefit by taking SOME of the passive losses, but does not want to take ALL of the passive losses. For example, let's say income is $40,000 and passive losses are the same $20,000. And hypothetically speaking, the person is married with 3 kids. What's the magic number where adjusted income exactly matches zero tax liability? And once that is determined, can the person choose to deduct only some of the passive losses and carry the rest over to a future tax year? How is that reported?
Question passive losses
Feb 14, 2011
3 Replies
For 2010, married gives you a $11,400 STD deduction + 5 x $3,650 of exemptions, or $29,650. The tax form will let the loss flow until taxable income is zero, the rest would get carried over until next year (or until used up). So, with no itemized deductions, and none of the other potential credits, $10,350 of the loss gets used this year. /Joe
Noted but unrealistic with 3 minor children - cf. child tax credit.
As for the OP, there is no discretion. You must take the amount the computation concludes, even if no tax benefit results due to other factors (e.g. the CTC).
Well, D, you are more than right to bring that to my attention. The Child Tax Credit is worth $1000/child, which if applied bottom up would appear to negate the tax on the first $22,833 of income. So the OP can gross $52,483 before starting to have taxable income, unless there are more credits missed or he itemizes.
In my original answer I was sticking to the main point, and did say "other credits", but I'll agree that this was too big to gloss over.
So, to the OP, you have no choices, but the loss will carry over 100%.
Joe
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