Ask a CPA

The depreciation year classification of a car used for business is 5 year property (5 year useful life)for MACRS depreciation purposes.

Yes. This is a deductible rental expense on IRS Schedule E.

Expenses for improvements are treated differently than expenses for repairs and maintenance. Generally, expenses that will last for more than one year will be considered a capital improvement and therefore must be depreciated, as opposed to being fully expensed in the year of outlay. Putting up a new roof or installing a new furnace, paving the driveway, finishing a basement, putting in new plumbing or wiring are examples of capital improvements. Replacing a broken window or painting, fixing leaks or plastering are examples of deductible repairs. Speak to your local CPA about your rental property income and allowed expenses.

Royalty income is taxed as ordinary income reportable on IRS Schedule E. Royalty income includes author's royalties, musical composition royalties, payments for use of patents or copyrights, and certain oil and gas entities.

Generally, you will not get a tax benefit from a tax credit resulting from a passive activity unless the passive activity has income that generates a tax. The tax must be equal or greater than the credit that is allocated to that passive activity to receive the full benefit of the credit. The disallowed credit may be carried forward to future years. The calculation of the allowed credit is reportable on IRS Form 8582-CR. Speak to your local CPA about the passive credits' deductibility.

Generally not. Interest income is defined as portfolio income, not passive income. Portfolio income includes interest, dividends, and gains on the sale of investment property. Passive K-1 losses can only be used to offset other passive income, except when the $25,000 special loss allowance for persons with active participation in rental real estate entities can be utilized. Speak to your local CPA about your K-1 loss deductibility.

No. Your prior year's disallowed losses will be allowed in full in the year of a full disposition. The current year's income or loss will be combined with the prior year's disallowed losses and the net amount will be allowed in full and is reportable on IRS Schedule E.

When you sell your passive activity interest at a gain, (using the installment sale method), the prior year suspended losses are not allowed in full.
You are allowed a prorated amount. They are only allowed in the same ratio as the gain recognized each year bears to the gain remaining to be recognized as of the start of the year.
Speak to your local CPA about your passive loss deductibility.

No. The K-1 disallowed losses due to the At Risk limitation rules are not lost and can be carried over and may be deductible in future years. The term "At risk" means the exposure to the danger of economic loss. A person can claim a tax deduction in a limited partnership up to the amount he or she is at risk if the taxpayer can show it is at risk of never realizing a profit and of losing its initial investment

The cost of over-the-counter medicines and drugs, such as aspirin, cold tablets or other cold remedies are not deductible. Deductible medicine and drugs must be obtained through a prescription by a doctor.