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Don’t let passive losses destroy your tax-favored capital gains

August 19, 2017

Do you own rental properties?

If you do, I hope they’re producing a nice cash flow for you.

But sadly, that doesn’t always happen. Sometimes your rentals produce losses which the IRS classifies as “passive losses” for tax purposes.

This is not necessarily terrible because you can deduct those losses against passive income you’ve earned.

The rental property losses that you can’t deduct immediately are called “suspended” passive losses.

Again, not necessarily terrible. You see, you can carry suspended passive losses forward indefinitely until you can deduct them against passive income down the road, or you dispose of the property.

Sound complicated? Well, it is a bit, but we’ll make everything clear when you read my new article titled Tax Tips: Passive Losses Don’t Destroy Your Tax-Favored Capital Gains!

Three ways our fact-filled article can help you:

  1. We’ll tell you the most important point to remember. Here it is short and sweet… although any gain or loss from the disposition of a passive activity is passive, your gains or losses retain their tax characteristics. You’ll learn the full implication of this when you read the full article.
  2. We’ll explain how to handle a capital gain. If all or some of your capital gain is attributable to depreciation, you’ll be taxed at the rates that apply to the unrecaptured Section 1250 gain. (It’s a type of depreciation-recapture income that’s realized on the sale of depreciable real estate.) You’ll get all the details when you read the full article.
  3. We’ll provide an example that will make everything crystal clear. Yes. I know this is all a bit complicated. So, I’ll walk you through the sale of a fictional rental property complete with numbers and explanations. If you own rental property, do this now: Read the full article.

Filed Under: Capital Gains, Depreciation, Passive income and losses, Rental Properties, Tax Policy

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