What are the basic rules relating to losses on real estate and real estate professionals?

Tax News You Can Use . . .

Code Section 179 expensing limits remain the same.....for now.

Taxpayers can elect to deduct the cost of qualified property placed in service in any given tax year under Code Section 179. Qualified property is tangible, depreciable personal property that is actively used in a trade or business.

In 2010, as in 2008 and 2009, taxpayers will be able to expense up to $250,000 of qualified property placed in service in 2010 under Code section 179. The $250,000 amount is phased out (reduced) if the total cost of the qualifying property placed in service during 2010 exceeds $800,000. Once the cost of the qualified property exceeds $1,050,000 the deduction phases out completely. The amounts for the deduction and phase out are not adjusted for inflation.

As the law stands now, for years beginning after 2010, the maximum expense amount under Code Section 179 will be $25,000 with the phase out beginning at $200,000.

If you have any questions regarding the expense amounts allowed under Code Section 179, please call us at any time.

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What are the basic rules relating to losses on real estate and real estate professionals?

Most taxpayers with incomes under $100,000 can deduct up to $25,000 of rental loss annually. The amount of available rental loss is reduced for taxpayers with income above $100,000 and is phased out completely at the $150,000 income level.

There is a way that some folks can take more of their rental losses. Eligible real estate professionals can deduct all of their losses from rental real estate, up to the amount of other income that they have.

To be considered a real estate professional, the following requirements must be met:

More than 50% of the taxpayer’s personal services must be performed in real property trades or businesses. Real property trades or businesses include development, construction, acquisition, conversion, rental, operation, management, or leasing.
The taxpayer must spend more than 750 hours during the year participating in real property trades or businesses.

Of course there are other intricacies of the law that should be reviewed and may affect the above general outline. Deciding whether to elect real estate professional status requires a careful consideration of a taxpayer’s complete income situation. Let us know if you would like some specific consultation on this area of the tax code.

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Napier & Company, LCC

Certified Public Accountants & Business Consultants

Tax News You Can Use . . .

Code Section 179 expensing limits remain the same.....for now.

Taxpayers can elect to deduct the cost of qualified property placed in service in any given tax year under Code Section 179. Qualified property is tangible, depreciable personal property that is actively used in a trade or business.

As the law stands now, for years beginning after 2010, the maximum expense amount under Code Section 179 will be $25,000 with the phase out beginning at $200,000.

If you have any questions regarding the expense amounts allowed under Code Section 179, please call us at any time.

For website suggestions, or to sign up for our e-newsletter contact our webmaster at: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it

What are the basic rules relating to losses on real estate and real estate professionals?