The Simpsons own and manage two rental houses (A & B). This year, House A generated a rental loss of $40,000, while House B generated rental income of $8,000. Their only other source of income during the year is from W-2 wages. Before accounting for the rental activity, their AGI is $137,000.

What amount, if any, of the rental losses are allowed this year?

What if their AGI (before rental activity) is $93,000? $187,000?