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I had to take the FL house back via Deed in Lieu of Foreclosure and will be renting the property after rehabing it. I now have eviction proceedings against the tenants, who have paid nothing, and were given until July 1 to move.

I am hoping to use a property management company. I could use the property management company to only collect the rents and find tenants through their screening process, and I will handle the repairs, etc. (This is my preferred method, as I have my own vendors who respond immediately when I call them.)

However, I can also use the management company to do everything.

What would be more advantageous taxwise?

Thanks,

Donna
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What would be more advantageous taxwise?

No difference. It's a passive activity either way.

--Peter
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Thanks, Peter, for getting me straight. When I rented it previously, I was not sure how TaxAct treated it. However, I did answer the question "Do you actively manage the property?", in the affirmative.

Donna
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When I rented it previously, I was not sure how TaxAct treated it. However, I did answer the question "Do you actively manage the property?", in the affirmative.

This is one of those rare occasions when I get to disagree with Peter. Well, there is the way he dresses, but I mean about taxes.

While rental real estate by a non-real estate professional is, by definition, passive, you can still use passive losses against non-passive income up to a certain AGI level if you actively participate. That's why the software was asking and why it does matter.

So, back to the pros for thoughts on that. There may be some discussion of active participation in Pub 527.

Phil
Rule Your Retirement Home Fool
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When I rented it previously, I was not sure how TaxAct treated it. However, I did answer the question "Do you actively manage the property?", in the affirmative.

That means if your AGI is low enough (as in under $100K), you can deduct up to $25k of losses from this rental against other kinds of income. Its a special flavor of passive activities - passive, but you can use some of the loss. Perhaps you can call it "actively passive". ;-)

If you do not actively manage the property, then its a fully passive activity, and you cannot deduct any loss unless you have passive income (or dispose of the property).

--Peter
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This is one of those rare occasions when I get to disagree with Peter. Well, there is the way he dresses, but I mean about taxes.

You say that as if you shredded every tie you owned the day you retired. ;-)

While rental real estate by a non-real estate professional is, by definition, passive,

That's the part of the definition I was working with.

you can still use passive losses against non-passive income up to a certain AGI level if you actively participate. That's why the software was asking and why it does matter.

And that's the rest of the definition.

It's not that I was actually wrong. (I'm often mistaken, but never wrong!) I was just incomplete. ;-)

--Peter
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I'm often mistaken, but never wrong!

I'm fond of "I may not know know exactly where I am, but I'm never lost."

But back to OP's question. Clearly, if she uses the management company to do everything, she's not actively participating. But how about her other scenario; is that active enough? I've never been clear on this.

Phil
Rule Your Retirement Home Fool
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