Originally Posted by thomassc
I have a new rental home that I was not able to collect enough rent to cover the mortgage payment per month. I'm wondering if I can deduct the $400 that I have to pay each month?
it depends aslongas you file Sch E of 1040, you may claim/ file mortgage interest as business expenses; IRS statistics show that over half of the filed Sch E forms reporting rental income and expenses each year show a loss; since you take losses on the rental home, rental losses are always classified as "passive losses" for tax purposes. This greatly limits your ability to deduct them because passive losses can only be used to offset passive income. They can't be deducted from income you earn from a job or investments such as stock or savings accounts. Without passive income, your rental losses become suspended losses you can't deduct until you have sufficient passive income in a future year or sell the property to an unrelated party. You may not be able to deduct such losses for years. In short, your rental losses will be useless without offsetting passive income. you with modified adjusted gross incomes of $100k or less may deduct up to $25k in rental real estate losses per year if you"actively participate" in the rental activity. You actively participate if you are involved in meaningful management decisions regarding the rental property and have more than a 10% ownership interest in the property. This allowance is phased out for you whose MAGI exceeds $100k and eliminated entirely when it exceeds $150k. Thus, it is useless for high-income landlords.