Last Minute Tax Tip - Collect Rent in Advance to Offset Loss Carryovers
One main benefit of owning rental property is being able report a loss, but some taxpayers cannot take advantage of this tax shelter due to high income loss limitations. Their losses get carried forward, and cannot get deducted until they are offset with future income.
If your rental expenses exceed rental income, and your AGI limitations do not allow you to claim a loss, you can decrease the loss carryover by increasing rental income.
Since rental income is taxable in the year it is collected, rental losses can be offset by collecting rent in advance. By increasing rental income for the year, you have the leverage to deduct more of your expenses.
Everyone's tax situation is different, and this information should not substitute professional advice. Taxpayers should always consult with their tax advisors to consider specific factors that might affect their situation.
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