Question

Tamar owns a condominium near Cocoa Beach in Florida. In 2022, she incurs the following expenses in connection with her condo:

Insurance $ 1,220
Advertising expense 610
Mortgage interest 4,270
Property taxes 999
Repairs & maintenance 760
Utilities 1,060
Depreciation 10,700

During the year, Tamar rented out the condo for 75 days, receiving $10,000 of gross income. She personally used the condo for 35 days during her vacation. Tamar's itemized deduction for nonrental taxes is less than $10,000 by more than the property taxes allocated to the rental use of the property.

Assume Tamar uses the IRS method of allocating expenses to rental use of the property.

Required:
a. What is the total amount of for AGI (rental) deductions Tamar may deduct in the current year related

Answer 1

Tamar's 'for AGI' rental deductions amount to $19,957 for the year, prorated based on the rental and personal use of her condo, following IRS rules.

Step-by-step explanation:

Tamar can deduct $19,957 'for AGI' on her rental condo for the year. This is calculated by allocating the rental expenses proportionally between the rental and personal use days, then applying the IRS rental expenses rules. The total number of days in the year is 365, and the condo was rented for 75 days and used personally for 35 days. Each expense is prorated to find the rental portion: Rental days / (Rental days + Personal use days).

The mortgage interest, property taxes, and deprecation are fully deductible rental expenses, while other expenses such as insurance, advertising, utilities, and repairs are limited to the rental activity. However, if Tamar's expenses exceed her rental income, the deduction might be limited to the amount of rental income earned, depending on her overall tax situation and other pertinent IRS rules.