Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
If your expenses outstrip the income, does anything need to be reported? If there is no net income, why depreciate?

Because a VR is considered an active investment, rather than a passive one like conventional rentals, there is no limit to the VR loss that can offset ordinary income. Even with conventional rentals you can deduct up to $25,000 against OI, so why on earth wouldn't you depreciate? Further, and Phil is certainly the voice of authority here, IIRC you don't have the choice but to depreciate a real estate investment. When you sell, you will still be expected to recapture depreciation even if you didn't take it. Sounds bizarre, I know, which makes me doubt my understanding every time I read it, but even not being a pro I've learned that common sense is not part of the IRS strategy.

Of course, the IRS will expect to see you treating this as a business, not a hobby or a tax deduction, with the intent to make money. You need to put the work in to show that you are trying to make money or they will disallow it as a business.

IP
Print the post  

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.