Question

The rental real estate exception favors: A. lower-income taxpayers (AGI less than $80,000). B. middle-income taxpayers (AGI greater than $80,000 and less than $150,000). C. upper-income taxpayers (AGI greater than $150,000). D. lower-income taxpayers and middle-income taxpayers. E. middle-income taxpayers and upper-income taxpayers.

Answer 1

Answer:

D) lower-income taxpayers and middle-income taxpayers.

Explanation:

The rental real estate exemption allows taxpayers who are not real estate professionals, to deduct up to $25,000 of real estate loss per year.

This exemption applies for taxpayers with an adjusted gross income of $150,000 or less. Only those that have an AGI of less than $100,000 are able to deduct the full $25,000 exemption, but as their AGI increase, the exemption starts to phase out.  

The two basic requirements for qualifying for this exemption is that the individual actively participates in the management of the real estate property that generated the loss and that they own at least a 10% interest in the property.