Wendy is a single taxpayer with adjusted gross income of $92,300 for tax year 2019. She has rental income of $55,000 and rental expenses of $80,000. What can Wendy report on her tax return given this situation? a. She can deduct $10,000 because her rental expenses exceeded her rental income
b. She can deduct $15,000 because her rental expenses exceeded her rental income
c. She can deduct $25,000 because her rental expenses exceeded her rental income

The correct option is c. She can deduct $25,000 because her rental expenses exceeded her rental income

= Rental expense - rent income

= 80,000 - 55,000

= $25,000

She can deduct $25,000.

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c. She can deduct $25,000 because her rental expenses exceeded her rental income

Explanation:

You are allowed a deduction when your rent expenses exceeds your rent income by the amount that the rent expense exceeds your net income by however, this deduction is limited to a maximum of $25,000.

This only applies however if the tax payer's adjusted gross income for the year is less than $100,000 which it is in this case.

= Rental expense - rent income

= 80,000 - 55,000

= $25,000

She can deduct $25,000.

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