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Taxact 2012 Return User

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Taxact 2012 Return User

Taxact 2012 return user Publication 901 - Introductory Material Table of Contents Future Developments Reminders IntroductionOrdering forms and publications. Taxact 2012 return user Tax questions. Taxact 2012 return user Obtaining copies of treaties. Taxact 2012 return user Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 901, such as treaties effective after it was published, go to www. Taxact 2012 return user irs. Taxact 2012 return user gov/pub901. Taxact 2012 return user Reminders Disclosure of a treaty-based position that reduces your tax. Taxact 2012 return user  If you take the position that any U. Taxact 2012 return user S. Taxact 2012 return user tax is overruled or otherwise reduced by a U. Taxact 2012 return user S. Taxact 2012 return user treaty (a treaty-based position), you generally must disclose that position on your affected return. Taxact 2012 return user See Application of Treaties, later. Taxact 2012 return user U. Taxact 2012 return user S. Taxact 2012 return user –U. Taxact 2012 return user S. Taxact 2012 return user S. Taxact 2012 return user R. Taxact 2012 return user income tax treaty. Taxact 2012 return user  The U. Taxact 2012 return user S. Taxact 2012 return user –U. Taxact 2012 return user S. Taxact 2012 return user S. Taxact 2012 return user R. Taxact 2012 return user income tax treaty remains in effect for the following members of the Commonwealth of Independent States: Armenia, Azerbaijan, Belarus, Georgia, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan. Taxact 2012 return user That treaty will remain in effect until new treaties with these individual countries are negotiated and ratified. Taxact 2012 return user Provisions of the U. Taxact 2012 return user S. Taxact 2012 return user –U. Taxact 2012 return user S. Taxact 2012 return user S. Taxact 2012 return user R. Taxact 2012 return user income tax treaty are discussed in this publication under Commonwealth of Independent States. Taxact 2012 return user U. Taxact 2012 return user S. Taxact 2012 return user –China income tax treaty. Taxact 2012 return user  The U. Taxact 2012 return user S. Taxact 2012 return user –China income tax treaty does not apply to Hong Kong. Taxact 2012 return user Introduction This publication will tell you whether a tax treaty between the United States and a particular country offers a reduced rate of, or possibly a complete exemption from, U. Taxact 2012 return user S. Taxact 2012 return user income tax for residents of that particular country. Taxact 2012 return user Tables in the back of this publication show the countries that have income tax treaties with the United States, the tax rates on different kinds of income, and the kinds of income that are exempt from tax. Taxact 2012 return user You should use this publication only for quick reference. Taxact 2012 return user It is not a complete guide to all provisions of every income tax treaty. Taxact 2012 return user Comments and suggestions. Taxact 2012 return user   We welcome your comments about this publication and your suggestions for future editions. Taxact 2012 return user   You can write to us at the following address: Internal Revenue Service Business Forms and Publications Branch SE:W:CAR:MP:T:B 1111 Constitution Ave. Taxact 2012 return user NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Taxact 2012 return user Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Taxact 2012 return user   You can email us at taxforms@irs. Taxact 2012 return user gov. Taxact 2012 return user Please put “Publications Comment” on the subject line. Taxact 2012 return user You can also send us comments from www. Taxact 2012 return user irs. Taxact 2012 return user gov/formspubs. Taxact 2012 return user Select “Comment on Tax Forms and Publications” under “Information About. Taxact 2012 return user ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Taxact 2012 return user Ordering forms and publications. Taxact 2012 return user   Visit www. Taxact 2012 return user irs. Taxact 2012 return user gov/formspubs to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received. Taxact 2012 return user Internal Revenue Service 1201 N. Taxact 2012 return user Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Taxact 2012 return user   If you have a tax question, check the information available on IRS. Taxact 2012 return user gov or call 1-800-829-1040. Taxact 2012 return user We cannot answer tax questions sent to either of the above addresses. Taxact 2012 return user Obtaining copies of treaties. Taxact 2012 return user   You can get complete information about treaty provisions from the taxing authority in the country from which you receive income or from the treaty itself. Taxact 2012 return user   You can obtain the text of most of the treaties at www. Taxact 2012 return user irs. Taxact 2012 return user gov/businesses/international. Taxact 2012 return user You can also obtain the text of most of the treaties at the following address: Department of the Treasury Office of Public Correspondence 1500 Pennsylvania Ave. Taxact 2012 return user NW — Rm. Taxact 2012 return user 3419 Washington, D. Taxact 2012 return user C. Taxact 2012 return user 20220 If you have specific questions about a treaty, you can get this information from most Internal Revenue Service offices or from: Internal Revenue Service International Section Philadelphia, PA 19255-0725 Useful Items - You may want to see: Publication 519 U. Taxact 2012 return user S. Taxact 2012 return user Tax Guide for Aliens 597 Information on the United States–Canada Income Tax Treaty Form (and Instructions) 8833 Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b) See How To Get Tax Help near the end of this publication for information about getting these publications and forms. Taxact 2012 return user Prev  Up  Next   Home   More Online Publications
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The Taxact 2012 Return User

Taxact 2012 return user 3. Taxact 2012 return user   Reporting Rental Income, Expenses, and Losses Table of Contents Which Forms To UseSchedule E (Form 1040) Schedule C (Form 1040), Profit or Loss From Business Qualified Joint Venture Limits on Rental LossesAt-Risk Rules Passive Activity Limits Casualties and Thefts Example Figuring the net income or loss for a residential rental activity may involve more than just listing the income and deductions on Schedule E (Form 1040). Taxact 2012 return user There are activities which do not qualify to use Schedule E, such as when the activity is not engaged in to make a profit or when you provide substantial services in conjunction with the property. Taxact 2012 return user There are also the limitations which may need to be applied if you have a net loss on Schedule E. Taxact 2012 return user There are two: (1) the limitation based on the amount of investment you have at risk in your rental activity, and (2) the special limits imposed on passive activities. Taxact 2012 return user You may also have a gain or loss related to your rental property from a casualty or theft. Taxact 2012 return user This is considered separately from the income and expense information you report on Schedule E. Taxact 2012 return user Which Forms To Use The basic form for reporting residential rental income and expenses is Schedule E (Form 1040). Taxact 2012 return user However, do not use that schedule to report a not-for-profit activity. Taxact 2012 return user See Not Rented for Profit , in chapter 4. Taxact 2012 return user There are also other rental situations in which forms other than Schedule E would be used. Taxact 2012 return user Schedule E (Form 1040) If you rent buildings, rooms, or apartments, and provide basic services such as heat and light, trash collection, etc. Taxact 2012 return user , you normally report your rental income and expenses on Schedule E, Part I. Taxact 2012 return user List your total income, expenses, and depreciation for each rental property. Taxact 2012 return user Be sure to enter the number of fair rental and personal use days on line 2. Taxact 2012 return user If you have more than three rental or royalty properties, complete and attach as many Schedules E as are needed to list the properties. Taxact 2012 return user Complete lines 1 and 2 for each property. Taxact 2012 return user However, fill in lines 23a through 26 on only one Schedule E. Taxact 2012 return user On Schedule E, page 1, line 18, enter the depreciation you are claiming for each property. Taxact 2012 return user To find out if you need to attach Form 4562, see Form 4562 , later. Taxact 2012 return user If you have a loss from your rental real estate activity, you also may need to complete one or both of the following forms. Taxact 2012 return user Form 6198, At-Risk Limitations. Taxact 2012 return user See At-Risk Rules , later. Taxact 2012 return user Also see Publication 925. Taxact 2012 return user Form 8582, Passive Activity Loss Limitations. Taxact 2012 return user See Passive Activity Limits , later. Taxact 2012 return user Page 2 of Schedule E is used to report income or loss from partnerships, S corporations, estates, trusts, and real estate mortgage investment conduits. Taxact 2012 return user If you need to use page 2 of Schedule E, be sure to use page 2 of the same Schedule E you used to enter your rental activity on page 1. Taxact 2012 return user Also, include the amount from line 26 (Part I) in the “Total income or (loss)” on line 41 (Part V). Taxact 2012 return user Form 4562. Taxact 2012 return user   You must complete and attach Form 4562 for rental activities only if you are claiming: Depreciation, including the special depreciation allowance, on property placed in service during 2013; Depreciation on listed property (such as a car), regardless of when it was placed in service; or Any other car expenses, including the standard mileage rate or lease expenses. Taxact 2012 return user Otherwise, figure your depreciation on your own worksheet. Taxact 2012 return user You do not have to attach these computations to your return, but you should keep them in your records for future reference. Taxact 2012 return user   See Publication 946 for information on preparing Form 4562. Taxact 2012 return user Schedule C (Form 1040), Profit or Loss From Business Generally, Schedule C is used when you provide substantial services in conjunction with the property or the rental is part of a trade or business as a real estate dealer. Taxact 2012 return user Providing substantial services. Taxact 2012 return user   If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, you report your rental income and expenses on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Taxact 2012 return user Use Form 1065, U. Taxact 2012 return user S. Taxact 2012 return user Return of Partnership Income, if your rental activity is a partnership (including a partnership with your spouse unless it is a qualified joint venture). Taxact 2012 return user Substantial services do not include the furnishing of heat and light, cleaning of public areas, trash collection, etc. Taxact 2012 return user For information, see Publication 334, Tax Guide for Small Business. Taxact 2012 return user Also, you may have to pay self-employment tax on your rental income using Schedule SE (Form 1040), Self-Employment Tax. Taxact 2012 return user For a discussion of “substantial services,” see Real Estate Rents in Publication 334, chapter 5. Taxact 2012 return user Qualified Joint Venture If you and your spouse each materially participate (see Material participation under Passive Activity Limits, later) as the only members of a jointly owned and operated real estate business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. Taxact 2012 return user This election, in most cases, will not increase the total tax owed on the joint return, but it does give each of you credit for social security earnings on which retirement benefits are based and for Medicare coverage if your rental income is subject to self-employment tax. Taxact 2012 return user If you make this election, you must report rental real estate income on Schedule E (or Schedule C if you provide substantial services). Taxact 2012 return user You will not be required to file Form 1065 for any year the election is in effect. Taxact 2012 return user Rental real estate income generally is not included in net earnings from self-employment subject to self-employment tax and generally is subject to the passive activity limits. Taxact 2012 return user If you and your spouse filed a Form 1065 for the year prior to the election, the partnership terminates at the end of the tax year immediately preceding the year the election takes effect. Taxact 2012 return user For more information on qualified joint ventures, go to IRS. Taxact 2012 return user gov and enter “qualified joint venture” in the search box. Taxact 2012 return user Limits on Rental Losses If you have a loss from your rental real estate activity, two sets of rules may limit the amount of loss you can deduct. Taxact 2012 return user You must consider these rules in the order shown below. Taxact 2012 return user Both are discussed in this section. Taxact 2012 return user At-risk rules. Taxact 2012 return user These rules are applied first if there is investment in your rental real estate activity for which you are not at risk. Taxact 2012 return user This applies only if the real property was placed in service after 1986. Taxact 2012 return user Passive activity limits. Taxact 2012 return user Generally, rental real estate activities are considered passive activities and losses are not deductible unless you have income from other passive activities to offset them. Taxact 2012 return user However, there are exceptions. Taxact 2012 return user At-Risk Rules You may be subject to the at-risk rules if you have: A loss from an activity carried on as a trade or business or for the production of income, and Amounts invested in the activity for which you are not fully at risk. Taxact 2012 return user Losses from holding real property (other than mineral property) placed in service before 1987 are not subject to the at-risk rules. Taxact 2012 return user In most cases, any loss from an activity subject to the at-risk rules is allowed only to the extent of the total amount you have at risk in the activity at the end of the tax year. Taxact 2012 return user You are considered at risk in an activity to the extent of cash and the adjusted basis of other property you contributed to the activity and certain amounts borrowed for use in the activity. Taxact 2012 return user Any loss that is disallowed because of the at-risk limits is treated as a deduction from the same activity in the next tax year. Taxact 2012 return user See Publication 925 for a discussion of the at-risk rules. Taxact 2012 return user Form 6198. Taxact 2012 return user   If you are subject to the at-risk rules, file Form 6198, At-Risk Limitations, with your tax return. Taxact 2012 return user Passive Activity Limits In most cases, all rental real estate activities (except those of certain real estate professionals, discussed later) are passive activities. Taxact 2012 return user For this purpose, a rental activity is an activity from which you receive income mainly for the use of tangible property, rather than for services. Taxact 2012 return user For a discussion of activities that are not considered rental activities, see Rental Activities in Publication 925. Taxact 2012 return user Deductions or losses from passive activities are limited. Taxact 2012 return user You generally cannot offset income, other than passive income, with losses from passive activities. Taxact 2012 return user Nor can you offset taxes on income, other than passive income, with credits resulting from passive activities. Taxact 2012 return user Any excess loss or credit is carried forward to the next tax year. Taxact 2012 return user Exceptions to the rules for figuring passive activity limits for personal use of a dwelling unit and for rental real estate with active participation are discussed later. Taxact 2012 return user For a detailed discussion of these rules, see Publication 925. Taxact 2012 return user Real estate professionals. Taxact 2012 return user   If you are a real estate professional, complete line 43 of Schedule E. Taxact 2012 return user      You qualify as a real estate professional for the tax year if you meet both of the following requirements. Taxact 2012 return user More than half of the personal services you perform in all trades or businesses during the tax year are performed in real property trades or businesses in which you materially participate. Taxact 2012 return user You perform more than 750 hours of services during the tax year in real property trades or businesses in which you materially participate. Taxact 2012 return user If you qualify as a real estate professional, rental real estate activities in which you materially participated are not passive activities. Taxact 2012 return user For purposes of determining whether you materially participated in your rental real estate activities, each interest in rental real estate is a separate activity unless you elect to treat all your interests in rental real estate as one activity. Taxact 2012 return user   Do not count personal services you perform as an employee in real property trades or businesses unless you are a 5% owner of your employer. Taxact 2012 return user You are a 5% owner if you own (or are considered to own) more than 5% of your employer's outstanding stock, or capital or profits interest. Taxact 2012 return user   Do not count your spouse's personal services to determine whether you met the requirements listed earlier to qualify as a real estate professional. Taxact 2012 return user However, you can count your spouse's participation in an activity in determining if you materially participated. Taxact 2012 return user Real property trades or businesses. Taxact 2012 return user   A real property trade or business is a trade or business that does any of the following with real property. Taxact 2012 return user Develops or redevelops it. Taxact 2012 return user Constructs or reconstructs it. Taxact 2012 return user Acquires it. Taxact 2012 return user Converts it. Taxact 2012 return user Rents or leases it. Taxact 2012 return user Operates or manages it. Taxact 2012 return user Brokers it. Taxact 2012 return user Choice to treat all interests as one activity. Taxact 2012 return user   If you were a real estate professional and had more than one rental real estate interest during the year, you can choose to treat all the interests as one activity. Taxact 2012 return user You can make this choice for any year that you qualify as a real estate professional. Taxact 2012 return user If you forgo making the choice for one year, you can still make it for a later year. Taxact 2012 return user   If you make the choice, it is binding for the tax year you make it and for any later year that you are a real estate professional. Taxact 2012 return user This is true even if you are not a real estate professional in any intervening year. Taxact 2012 return user (For that year, the exception for real estate professionals will not apply in determining whether your activity is subject to the passive activity rules. Taxact 2012 return user )   See the Instructions for Schedule E for information about making this choice. Taxact 2012 return user Material participation. Taxact 2012 return user   Generally, you materially participated in an activity for the tax year if you were involved in its operations on a regular, continuous, and substantial basis during the year. Taxact 2012 return user For details, see Publication 925 or the Instructions for Schedule C. Taxact 2012 return user Participating spouse. Taxact 2012 return user   If you are married, determine whether you materially participated in an activity by also counting any participation in the activity by your spouse during the year. Taxact 2012 return user Do this even if your spouse owns no interest in the activity or files a separate return for the year. Taxact 2012 return user Form 8582. Taxact 2012 return user    You may have to complete Form 8582 to figure the amount of any passive activity loss for the current tax year for all activities and the amount of the passive activity loss allowed on your tax return. Taxact 2012 return user See Form 8582 not required , later in this chapter, to determine if you must complete Form 8582. Taxact 2012 return user   If you are required to complete Form 8582 and are also subject to the at-risk rules, include the amount from Form 6198, line 21 (deductible loss) in column (b) of Form 8582, Worksheet 1 or 3, as required. Taxact 2012 return user Exception for Personal Use of Dwelling Unit If you used the rental property as a home during the year, any income, deductions, gain, or loss allocable to such use shall not be taken into account for purposes of the passive activity loss limitation. Taxact 2012 return user Instead, follow the rules explained in chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Taxact 2012 return user Exception for Rental Real Estate With Active Participation If you or your spouse actively participated in a passive rental real estate activity, you may be able to deduct up to $25,000 of loss from the activity from your nonpassive income. Taxact 2012 return user This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities. Taxact 2012 return user Similarly, you may be able to offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception. Taxact 2012 return user Example. Taxact 2012 return user Jane is single and has $40,000 in wages, $2,000 of passive income from a limited partnership, and $3,500 of passive loss from a rental real estate activity in which she actively participated. Taxact 2012 return user $2,000 of Jane's $3,500 loss offsets her passive income. Taxact 2012 return user The remaining $1,500 loss can be deducted from her $40,000 wages. Taxact 2012 return user The special allowance is not available if you were married, lived with your spouse at any time during the year, and are filing a separate return. Taxact 2012 return user Active participation. Taxact 2012 return user   You actively participated in a rental real estate activity if you (and your spouse) owned at least 10% of the rental property and you made management decisions or arranged for others to provide services (such as repairs) in a significant and bona fide sense. Taxact 2012 return user Management decisions that may count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and other similar decisions. Taxact 2012 return user Example. Taxact 2012 return user Mike is single and had the following income and losses during the tax year:   Salary $42,300     Dividends 300     Interest 1,400     Rental loss (4,000)   The rental loss was from the rental of a house Mike owned. Taxact 2012 return user Mike had advertised and rented the house to the current tenant himself. Taxact 2012 return user He also collected the rents, which usually came by mail. Taxact 2012 return user All repairs were either made or contracted out by Mike. Taxact 2012 return user Although the rental loss is from a passive activity, because Mike actively participated in the rental property management he can use the entire $4,000 loss to offset his other income. Taxact 2012 return user Maximum special allowance. Taxact 2012 return user   The maximum special allowance is: $25,000 for single individuals and married individuals filing a joint return for the tax year, $12,500 for married individuals who file separate returns for the tax year and lived apart from their spouses at all times during the tax year, and $25,000 for a qualifying estate reduced by the special allowance for which the surviving spouse qualified. Taxact 2012 return user   If your modified adjusted gross income (MAGI) is $100,000 or less ($50,000 or less if married filing separately), you can deduct your loss up to the amount specified above. Taxact 2012 return user If your MAGI is more than $100,000 (more than $50,000 if married filing separately), your special allowance is limited to 50% of the difference between $150,000 ($75,000 if married filing separately) and your MAGI. Taxact 2012 return user   Generally, if your MAGI is $150,000 or more ($75,000 or more if you are married filing separately), there is no special allowance. Taxact 2012 return user Modified adjusted gross income (MAGI). Taxact 2012 return user   This is your adjusted gross income from Form 1040, U. Taxact 2012 return user S. Taxact 2012 return user Individual Income Tax Return, line 38, or Form 1040NR, U. Taxact 2012 return user S. Taxact 2012 return user Nonresident Alien Income Tax Return, line 37, figured without taking into account: The taxable amount of social security or equivalent tier 1 railroad retirement benefits, The deductible contributions to traditional individual retirement accounts (IRAs) and section 501(c)(18) pension plans, The exclusion from income of interest from Series EE and I U. Taxact 2012 return user S. Taxact 2012 return user savings bonds used to pay higher educational expenses, The exclusion of amounts received under an employer's adoption assistance program, Any passive activity income or loss included on Form 8582, Any rental real estate loss allowed to real estate professionals, Any overall loss from a publicly traded partnership (see Publicly Traded Partnerships (PTPs) in the Instructions for Form 8582), The deduction allowed for one-half of self-employment tax, The deduction allowed for interest paid on student loans, The deduction for qualified tuition and related fees, and The domestic production activities deduction (see the Instructions for Form 8903). Taxact 2012 return user Form 8582 not required. Taxact 2012 return user   Do not complete Form 8582 if you meet all of the following conditions. Taxact 2012 return user Your only passive activities were rental real estate activities in which you actively participated. Taxact 2012 return user Your overall net loss from these activities is $25,000 or less ($12,500 or less if married filing separately and you lived apart from your spouse all year). Taxact 2012 return user If married filing separately, you lived apart from your spouse all year. Taxact 2012 return user You have no prior year unallowed losses from these (or any other passive) activities. Taxact 2012 return user You have no current or prior year unallowed credits from passive activities. Taxact 2012 return user Your MAGI is $100,000 or less ($50,000 or less if married filing separately and you lived apart from your spouse all year). Taxact 2012 return user You do not hold any interest in a rental real estate activity as a limited partner or as a beneficiary of an estate or a trust. Taxact 2012 return user   If you meet all of the conditions listed above, your rental real estate activities are not limited by the passive activity rules and you do not have to complete Form 8582. Taxact 2012 return user On lines 23a through 23e of your Schedule E, enter the applicable amounts. Taxact 2012 return user Casualties and Thefts As a result of a casualty or theft, you may have a loss related to your rental property. Taxact 2012 return user You may be able to deduct the loss on your income tax return. Taxact 2012 return user Casualty. Taxact 2012 return user   This is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Taxact 2012 return user Such events include a storm, fire, or earthquake. Taxact 2012 return user Theft. Taxact 2012 return user   This is defined as the unlawful taking and removing of your money or property with the intent to deprive you of it. Taxact 2012 return user Gain from casualty or theft. Taxact 2012 return user   It is also possible to have a gain from a casualty or theft if you receive money, including insurance, that is more than your adjusted basis in the property. Taxact 2012 return user Generally, you must report this gain. Taxact 2012 return user However, under certain circumstances, you may defer paying tax by choosing to postpone reporting the gain. Taxact 2012 return user To do this, you generally must buy replacement property within 2 years after the close of the first tax year in which any part of your gain is realized. Taxact 2012 return user In certain circumstances, the replacement period can be greater than 2 years; see Replacement Period in Publication 547 for more information. Taxact 2012 return user The cost of the replacement property must be equal to or more than the net insurance or other payment you received. Taxact 2012 return user More information. Taxact 2012 return user   For information on business and nonbusiness casualty and theft losses, see Publication 547. Taxact 2012 return user How to report. Taxact 2012 return user    If you had a casualty or theft that involved property used in your rental activity, figure the net gain or loss in Section B of Form 4684, Casualties and Thefts. Taxact 2012 return user Follow the Instructions for Form 4684 for where to carry your net gain or loss. Taxact 2012 return user Example In February 2008, Marie Pfister bought a rental house for $135,000 (house $120,000 and land $15,000) and immediately began renting it out. Taxact 2012 return user In 2013, she rented it all 12 months for a monthly rental fee of $1,125. Taxact 2012 return user In addition to her rental income of $13,500 (12 x $1,125), Marie had the following expenses. Taxact 2012 return user Mortgage interest $8,000 Fire insurance (1-year policy) 250 Miscellaneous repairs 400 Real estate taxes imposed and paid 500 Maintenance 200 Marie depreciates the residential rental property under MACRS GDS. Taxact 2012 return user This means using the straight line method over a recovery period of 27. Taxact 2012 return user 5 years. Taxact 2012 return user She uses Table 2-2d to find her depreciation percentage. Taxact 2012 return user Because she placed the property in service in February 2008, she continues to use that row of Table 2-2d. Taxact 2012 return user For year 6, the rate is 3. Taxact 2012 return user 636%. Taxact 2012 return user Marie figures her net rental income or loss for the house as follows: Total rental income received  ($1,125 × 12) $13,500 Minus: Expenses     Mortgage interest $8,000   Fire insurance 250   Miscellaneous repairs 400   Real estate taxes 500   Maintenance 200   Total expenses 9,350 Balance $4,150 Minus: Depreciation ($120,000 x 3. Taxact 2012 return user 636%) 4,363 Net rental (loss) for house ($213)       Marie had a net loss for the year. Taxact 2012 return user Because she actively participated in her passive rental real estate activity and her loss was less than $25,000, she can deduct the loss on her return. Taxact 2012 return user Marie also meets all of the requirements for not having to file Form 8582. Taxact 2012 return user She uses Schedule E, Part I, to report her rental income and expenses. Taxact 2012 return user She enters her income, expenses, and depreciation for the house in the column for Property A and enters her loss on line 22. Taxact 2012 return user Form 4562 is not required. Taxact 2012 return user Prev  Up  Next   Home   More Online Publications