Active Participation in a passive activity w/ prop. Mgmt? + Rental Real Estate Loss Allowance?

Hi,
I own one home in FL which I am currently paying interest on both a mortgage and a HELoC. I will be soon moving to GA for a few years to work as a contractor and (hopefully) go to graduate school (still deciding on whether I should rent or buy up there). I am currently trying to rent out the FL unit but due to current market conditions, will probably do so at a loss. To make things worse I understand that I will have to pay taxes on rental income. I have read though that I can claim mortgage interest + property taxes + HOA + property management fees + etc. on Schedule E to offsest the 'passive activity' rental income (but of course I assume this would mean I would no longer be able to declare it on Schedule A).


Is it required I declare mortgage interest as a deduction on Schedule E or can I still declare it on Schedule A if I end up renting in GA? If I do, I assume I would have to carry forward excess loss every year and only apply it against future rental income? (but not ordinary income? [see question 3 below]) If so, how do the calculations work?


Since I won't be in FL for the next few years, if I hire a property manager to help handle the advertising of the unit, can I deduct those expenses AND still qualify for the $25k 'Rental Real Estate Loss Allowance'? or will it interfere with the definition of:


"Active Participation Sub-Issue

As long as a taxpayer participates in management decisions in a bona fide sense, he actively participated in the real estate rental activity. There is no specific hour requirement. However, the taxpayer must be exercising independent judgment and not simply ratifying decisions made by a manager." (see Passive Activity Loss ATG - Chapter 2, Rental Losses (http://www.irs.gov/businesses/small/article/0,,id=146326,00.html#_ftn20)).

Is there any other IRS documentation that expounds on the passage above in regards to the claim for a deduction of 'rental property management expenses'?


Can 'Rental Real Estate Loss Allowance' be applied to offset ORDINARY income (ie: non-passive income) as described here?: TaxTuneup Dictionary of Tax Deductions: R (http://www.taxtuneup.com/DictionaryR.htm#Rental%20Real%20Estate%20Loss%20Al lowance) or is this incorrect? I read somewhere this was changed in 1987. Finally...

Does GA tax FL rental income?


Thanks in advance!

1) All deductions associated to the home when it becomes a rental property (the date when the house becomes available to be rented) are deducted on the Schedule E, to include mortgage interest. Now, if your net income from other income is LESS than about $120,000, you can deduct the excess loss from your other income sources. If your income is MORE than $120K, the loss is a "passive loss" which accrues from year to year.

2) Yes, you can claim the manger's fees as a deduction, and, no, it does NOT interfere with your active participation.

3) Yes, if your income is low enough (see above).

4) Yes, if you file as a Georgia resident, then ALL world-wide income is subject to Georgia income tax.