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a single taxpayer has adjusted gross income(agi) of $200,000 from his w-2 and 3 rental properties with total real estate losses of $20,000. assuming that he is not a real estate professional, how much real estate losses can he use this year to reduce taxes from his w-2 income?

User Bertran
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Final answer:

A single taxpayer with a $200,000 AGI and $20,000 in rental losses cannot use any real estate losses to reduce their W-2 income due to surpassing the phaseout limit for passive activity loss deductions.

Step-by-step explanation:

The single taxpayer with an adjusted gross income (AGI) of $200,000 and $20,000 in rental losses can use $0 to reduce his W-2 income this year. This is because the tax rules for passive activities, including non-professional real estate investing, generally limit the deduction of passive losses against non-passive income.

Specifically, under the current tax law, individuals with a modified adjusted gross income (MAGI) of $100,000 or less can deduct up to $25,000 of passive real estate losses against their non-passive income. This deduction phases out by $0.50 for each dollar of MAGI above $100,000 and completely phases out at a MAGI of $150,000. Since this taxpayer's AGI exceeds the phaseout limit, they cannot use their real estate losses to reduce their tax liability for their W-2 income in the current year.

The taxpayer can use $0 of the real estate losses to reduce taxes from his W-2 income. As a single taxpayer, he can only deduct up to $3,000 of his real estate losses against his non-passive income, such as his W-2 income. The remaining $17,000 of real estate losses can be carried forward to future years to offset any future rental income or future passive gains.

User Charlie Collins
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