If you show income from your job or business and claim rental-property losses, be wary. The IRS rules limit deducting those losses in the current year, unless you prove you’re actively involved in managing the property.

“It’s a real hot item right now: Audit people who make significant income from their jobs and also claim rental losses,” McKenzie said.

In one case, the wife of a real-estate attorney — a stay-at-home mom with three young kids — managed the family’s rental properties, but the IRS said the couple couldn’t deduct rental losses in the current year. On appeal they won their case, McKenzie said.

“We were able to prove yes, he couldn’t have devoted 50% of his time [to the rentals] and made $600,000 a year, but she could,” he said.

Rental losses Red Flags

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