Witholding from Paycheck and Passive Losses against MAGI

[Eurotexan]

Hi everyone! Would welcome some advice about withholding taxes and passive losses against MAGI. I am trying to get my tax liability as low as possible this year by maxing out retirement accounts, I am also putting some upgrades into my rental house so I will show a loss this year. Not great for my monthly budget but good for my taxes and long term investment into the property. A couple of questions I have:

Does rental losses reduce my MAGI? I am right on the borderline between being able to deduct a traditional IRA (I have a 401K at work so it is down to income) and I am confused about whether passive losses will drive down my MAGI or just my AGI.

Also, right now I am looking at about an $8K refund, I currently withhold 10 (I also live in TX which doesn't have state income tax so I am just dealing with federal). I spoke to my HR department about upping my withholding number but they warned me against it but said I could do it if I really wanted to. Kind of a weird response.

Thank you for your help!

[wtjbatman]

Your HR department probably doesn't trust you know what you're doing when you talk about raising your withholding. 10 probably feels like a lot (I withhold 1) to some people. They probably expect that if you raise your withholding you will end up not paying enough in taxes. Obviously, your HR department doesn't know the details of your personal finances. Or I would hope not anyway.

[mcneally]

Putting upgrades in your rental properties won't do much to your current year taxable income considering they are depreciable, not deductible...

[Cheddar Stacker]

Does rental losses reduce my MAGI? I am right on the borderline between being able to deduct a traditional IRA (I have a 401K at work so it is down to income) and I am confused about whether passive losses will drive down my MAGI or just my AGI.

I commented on a similar question in reply #88 and reply #91 here:
http://forum.mrmoneymustache.com/welcome-to-the-forum/optimize-your-taxable-income/msg236555/#msg236555

Since you are right on the borderline of being able to deduct a TIRA, you are also likely right on the borderline of being able to deduct a passive loss. If you are able to deduct a passive loss, it will reduce your AGI, but MAGI is tricky. MAGI calculations add back different things for almost every type of calculation. I'm unsure on the exact add backs for the TIRA deduction, but you should be able to find them on the IRS website which I linked to in the link above.

If you have any capital losses to harvest, now would be the time to get that $3K AGI/MAGI reduction. Take advantage of every single tax deferral item your employer offers as well.