Suspended Rental Losses

YOUR RENTAL LOSSES MAY BE LIMITED unless you are a real estate professional. If your adjusted gross income (AGI) is $ 150,000 or more ALL of the rental loss is suspended. It can be carried forward and can be used in future years if your income declines sufficiently, or can be taken in the year you dispose of the rental property even if your income exceeds $ 150,000 in the year of the sale.

IF YOU MAKE LESS THAN $ 150,000, you may still lose part of the rental loss. Here is the way the allowable loss is calculated: [$150,000 minus AGI] X 50%. For example, if you made $125,000: [$150,000 - $125,00] X 50% =$12500. If you lost more than $ 12500, only $12500 would be allowed.

If your AGI was $ 40000, you would only have a suspended loss if your rental loss exceeded $ 55000.
If your AGI was MORE than $ 150,000 and stays above that level in future years, you can only take the loss when you dispose of the property.

The only exception is if you are a “real estate professional” the losses are fully allowable.
http://www.1040.com/taxxcpa/