Question

If a residence is classified as personal/rental use property, the expenses that are deductible anyway (i.e. real estate taxes and mortgage interest) must be deducted first.If a positive net income results, expenses, other than depreciation, that are deductible for rental property (i.e. maintenance, utilities, and insurance) are allowed next.Finally, if any positive balance remains, depreciation is allowed. Any disallowed expenses allocable to rental use are carried forward and used in future years subject to the same limitations.True or false?

Answer 1

If a residence is classified as personal/rental use property, the expenses that are deductible anyway (i.e. real estate taxes and mortgage interest) must be deducted first. If a positive net income results, expenses, other than depreciation, that are deductible for rental property (i.e. maintenance, utilities, and insurance) are allowed next. Finally, if any positive balance remains, depreciation is allowed.

Step-by-step explanation:

True. If a residence is classified as personal/rental use property, the expenses that are deductible anyway (i.e. real estate taxes and mortgage interest) must be deducted first. If a positive net income results, expenses, other than depreciation, that are deductible for rental property (i.e. maintenance, utilities, and insurance) are allowed next. Finally, if any positive balance remains, depreciation is allowed. Any disallowed expenses allocable to rental use are carried forward and used in future years subject to the same limitations.