Author Topic: Standard deduction and passive losses  (Read 504 times)

SugarMountain

  • Pencil Stache
  • ****
  • Posts: 531
Standard deduction and passive losses
« on: May 22, 2018, 01:40:41 PM »
I've been itemizing for years but if I retire this year, my 2019 taxes will likely just used the $26k standard deduction.  How does rental income that gets offset by depreciation and other rental expenses fit in if you take the standard deduction, is it still deducted from the rental income?  For example, if I have $50k in ordinary income and take the standard deduction, but also have $20k in rental income on a house that is depreciating at $20k/year, do I end up with AGI of $24k ($50k-26k+(20k-20k)) or $44k ($50k+20k-26k)?

secondcor521

  • Handlebar Stache
  • *****
  • Posts: 1588
  • Age: 49
  • Location: Boise, Idaho
  • Big cattle, no hat.
    • Age of Eon - Overwatch player videos
Re: Standard deduction and passive losses
« Reply #1 on: May 22, 2018, 02:08:48 PM »
Not an expert, but I believe the answers to your question are that the depreciation would still be deducted from the rental income on Schedule E, you'd end up with a $0 on line 17 of Form 1040 and your AGI would end up at $24K.

[Edited to correct name of schedule.]
« Last Edit: May 22, 2018, 03:58:26 PM by secondcor521 »

Sibley

  • Magnum Stache
  • ******
  • Posts: 3087
  • Age: 32
  • Location: Chicago, IL
Re: Standard deduction and passive losses
« Reply #2 on: May 22, 2018, 03:49:19 PM »
All the rental stuff is on form E and possibly related (can't remember all the forms). That flows into the income section of the 1040, page 1. Bottom of page 1 is your AGI. Top of page 2 is itemized/standard deduction (at least on the pre-2018 forms).

If you've been putting rental stuff on your Schedule A (itemized deductions), then you need to get a professional to file amended returns because you've been doing it wrong and most likely not minimizing taxes, and should not be doing your taxes yourself. If you're just confused about terminology, now you know. :)

MDM

  • Walrus Stache
  • *******
  • Posts: 8273
Re: Standard deduction and passive losses
« Reply #3 on: May 22, 2018, 04:33:36 PM »
There is a $25K limit on rental losses (unless that really is your primary business) that phases out at higher AGIs.  That's actually coded in the next version of the case study spreadsheet which will be released one of these days.  One can use Notify to be notified when updates are made.

SugarMountain

  • Pencil Stache
  • ****
  • Posts: 531
Re: Standard deduction and passive losses
« Reply #4 on: May 22, 2018, 05:59:01 PM »
All the rental stuff is on form E and possibly related (can't remember all the forms). That flows into the income section of the 1040, page 1. Bottom of page 1 is your AGI. Top of page 2 is itemized/standard deduction (at least on the pre-2018 forms).

If you've been putting rental stuff on your Schedule A (itemized deductions), then you need to get a professional to file amended returns because you've been doing it wrong and most likely not minimizing taxes, and should not be doing your taxes yourself. If you're just confused about terminology, now you know. :)

That's the danger of doing taxes through Turbo Tax, unless you review after printing, you don't really know what schedule everything is actually going on.  I used to know more when I did them with the book and by hand.  I just checked and the rental income/expenses are indeed on Schedule E.