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Can I apply for an "Exception for Rental Real Estate with Active Participation" deduction up to $25K if I used the property for about 3 weeks while renovating and repairing it? Or are those days considered personal use? |
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Hi 'Home Renovator', Days used for repairs and maintenance of the property are not taken into account when determining which days the dwelling unit was used for personal purposes. You will want to review IRS Pub 527 (Residential Rental Property): http://www.irs.gov/pub/irs-pdf/p527.pdf chapter 5, to make a final determination in that regard. Also, you have used the word "renovation." Be aware that the IRS makes a distinction between maintenance and repairs, versus improvements. A repair keeps the property in good working condition, while an improvement adds value. Further, repairs may be deducted as an expense, while improvements would be capitalized. IF after reviewing Pub 527 and determining that you qualify for the exception under active participation, you would be allowed to deduct up to a $25,000 loss. IF you do have personal use of the dwelling, your expenses/losses will be limited. Good Luck! |
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If you renovated your property youself that by itself makes you an active participant. 1
Hi Cpahispano... welcome to the forum. Presumably, you would be correct... if the property had already been placed into service, there was an ownership interest greater than 10%, and the poster made management decisions, but the repair alone doesn’t constitute that. Poster seems to be concerned with the passive activity loss cap of 25K which will be limited if he determines that there was in fact personal use of the property, or if he files as MFS.
(03 Mar '11, 17:20)
Kristy M. W.
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