8. Claiming Rental Losses

Claiming a substantial rental loss can draw the IRS’s attention. Usually, the passive loss rules prohibit deducting rental real estate losses. However, there are major exceptions. You can deduct up to $25,000 of rental losses per year as long as you have a consistent involvement in your property’s renting process. This $25,000 limit phases out as the income levels are getting higher.

The second exception has to do with real estate professionals who dedicate more than half of their working hours as brokers, landlords, developers, and so on. Basically, by doing this, they are able to deduct rental losses.

The IRS agents are constantly looking after substantial rental real estate losses. You may be eligible for the second exception if you’ve decided to manage properties in your golden years. You can also deduct the losses after selling a rental property that generated suspended passive losses. Just keep in mind that you have to be prepared for an IRS Audit.

Want to know more about taxes in retirement? Here’s an article that may give you the answers you were looking for: 7 Questions Retirees Need To Ask Themselves.