Final answer:
Joe Taxpayer can deduct $20,000 of his rental property losses against his AGI of $110,000, and the remaining $80,000 can be carried forward to future years. This deductible amount is independent of his marital status, as the limit and phase-out threshold remain the same.
Step-by-step explanation:
For an individual actively participating in rental real estate activities with an adjusted gross income (AGI) of $110,000, the tax code permits the deduction of passive activity losses up to $25,000 under certain conditions. This deduction phases out at a rate of $0.50 for every dollar the AGI exceeds $100,000, so once AGI hits $150,000, the deduction is eliminated entirely.
Joe Taxpayer is able to deduct losses from the rental properties up to the limit determined by his AGI.
Because his AGI is $110,000, his deduction limit is reduced by
$5,000 (($110,000 - $100,000) * $0.50),
thus allowing
$20,000 ($25,000 - $5,000) in losses.
His rental property losses are ($10,000), ($20,000), and ($70,000), totaling ($100,000).
He can deduct $20,000 of these losses and carry forward the remaining $80,000.
If Joe was married, the limit would apply to their joint income, but the maximum deductible amount and phase-out thresholds would remain the same unless his spouse also has rental property losses or income that might affect the total AGI and rental activity loss limits.