Tax law does not trust your rental property tax deductions.
The law assumes that you have the power to make your rental properties generate losses for tax purposes and that you can do this without suffering any real economic loss.
To prevent your deducting a loss without suffering economic penalty, the government created a “passive loss” deduction test. When you fail this test, your rental property tax losses go to the suspended-losses tar pit.
And then, every subsequent year that you fail the passive-loss test and also have rental property losses, the IRS tosses your losses into the suspended-loss tar pit ... Log in to view full article.