Thursday, September 8, 2011

Reader with Real Estate Questions

I had the following come in from a reader:

“George, we are considering purchasing a rental property. The question we have is: Can our adjusted gross income (if it is too high) preclude us from deducting any losses (depreciation, property taxes, mortgage interest) from our current income taxes?

“Also, do people incorporate and what would that do for us? I appreciate your input.” —Kay

My reply …

“Kay, your income should not prevent you from deducting losses. For more info, here are the instructions.

“Most taxpayers, including me, own the property personally and just file a Schedule E. Sure, you could incorporate. Tax wise, though, I don't see what that would accomplish for you. And a mortgage company will make you personally guarantee the note.

“Yes, it might shield you from liability in case of a law suit. But a good liability insurance policy can protect you even better.”

Best wishes,


P.S. Do you have a question about your real estate investment? Post it here or drop me an e-mail.


  1. Passive income losses are limited to $25,000 for AGI below $100,000. Then they are phased out .50 per dollar for AGI between 100,000 and 150,000. If you AGI is above 150,000 then you cannot deduct passive income losses.

  2. Wow, I sure blew that one! However, the link in the posting goes over the “exception for certain rental real estate activities.” Here’s a link (,,id=146326,00.html)that explains it better yet.

    Thanks for pointing this out.