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previous page Previous Page: Publication 17 - Your Federal Income Tax - Depreciation
next page Next Page: Publication 17 - Your Federal Income Tax - How To Report Rental Income and Expenses
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication
taxmap/pub17/p17-049.htm#en_us_publink100032863

Limits on 
Rental Losses(p70)


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previous topic occurrence Limits on Rental Losses next topic occurrence

Rental real estate activities are generally considered passive activities, and the amount of loss you can deduct is limited. Generally, you cannot deduct losses from rental real estate activities unless you have income from other passive activities. However, you may be able to deduct rental losses without regard to whether you have income from other passive activities if you "materially" or "actively" participated in your rental activity. See Passive Activity Limits, later.
Losses from passive activities are first subject to the at-risk rules. At-risk rules limit the amount of deductible losses from holding most real property placed in service after 1986.
taxmap/pub17/p17-049.htm#en_us_publink100032864

Exception.(p70)


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previous topic occurrence Exception. next topic occurrence

If your rental losses are less than $25,000, and you actively participated in the rental activity, the passive activity limits probably do not apply to you. See Losses From Rental Real Estate Activities, later.
taxmap/pub17/p17-049.htm#en_us_publink100032865

Property used as a home.(p70)


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previous topic occurrence Property Used as a Home next topic occurrence

If you used the rental property as a home during the year, the passive activity rules do not apply to that home. Instead, you must follow the rules explained under Personal Use of Dwelling Unit (Including Vacation Home), earlier.
taxmap/pub17/p17-049.htm#en_us_publink100032866

At-Risk Rules(p70)


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previous topic occurrence Passive Activity and At-Risk Rules next topic occurrence

The at-risk rules place a limit on the amount you can deduct as losses from activities often described as tax shelters. Losses from holding real property (other than mineral property) placed in service before 1987 are not subject to the at-risk rules.
Generally, any loss from an activity subject to the at-risk rules is allowed only to the extent of the total amount you have at risk in the activity at the end of the tax year. You are considered at risk in an activity to the extent of cash and the adjusted basis of other property you contributed to the activity and certain amounts borrowed for use in the activity. See Publication 925 for more information.
taxmap/pub17/p17-049.htm#en_us_publink100032867

Passive Activity Limits(p70)


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Generally, all rental activities (except those meeting the exception for real estate professionals, below) are passive activities. For this purpose, a rental activity is an activity from which you receive income mainly for the use of tangible property, rather than for services.
taxmap/pub17/p17-049.htm#en_us_publink100032868

Limits on passive activity deductions and credits.(p70)


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Limits on passive activity deductions and credits.

Deductions for losses from passive activities are limited. You generally cannot offset income, other than passive income, with losses from passive activities. Nor can you offset taxes on income, other than passive income, with credits resulting from passive activities. Any excess loss or credit is carried forward to the next tax year.
For a detailed discussion of these rules, see Publication 925.
You may have to complete Form 8582 to figure the amount of any passive activity loss for the current tax year for all activities and the amount of the passive activity loss allowed on your tax return.
taxmap/pub17/p17-049.htm#en_us_publink100032869

Exception for real estate professionals.(p70)


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Exception for real estate professionals.

Rental activities in which you materially participated during the year are not passive activities if, for that year, you were a real estate professional. For a detailed discussion of the requirements, see Publication 527. For a detailed discussion of material participation, see Publication 925.
taxmap/pub17/p17-049.htm#en_us_publink100032870

Losses From Rental Real Estate Activities(p70)


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Losses From Rental Real Estate Activities

If you or your spouse actively participated in a passive rental real estate activity, you can deduct up to $25,000 of loss from the activity from your nonpassive income. This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities. Similarly, you can offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception.
taxmap/pub17/p17-049.htm#en_us_publink1000103344

Active participation.(p70)


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Active participation.

You actively participated in a rental real estate activity if you (and your spouse) owned at least 10% of the rental property and you made management decisions in a significant and bona fide sense. Management decisions include approving new tenants, deciding on rental terms, approving expenditures, and similar decisions.
taxmap/pub17/p17-049.htm#en_us_publink100090839

Maximum special allowance.(p70)


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Maximum special allowance.

The maximum special allowance is:
If your modified adjusted gross income is more than $100,000 (more than $50,000 if married filing separately), your special allowance is limited to 50% of the difference between $150,000 ($75,000 if married filing separately) and your modified adjusted gross income.
Generally, if your modified adjusted gross income is $150,000 or more ($75,000 or more if you are married filing separately), there is no special allowance.
taxmap/pub17/p17-049.htm#en_us_publink100032872

More information.(p72)


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See Publication 925 for more information on the passive loss limits, including information on the treatment of unused disallowed passive losses and credits and the treatment of gains and losses realized on the disposition of a passive activity.
previous pagePrevious Page: Publication 17 - Your Federal Income Tax - Depreciation
next pageNext Page: Publication 17 - Your Federal Income Tax - How To Report Rental Income and Expenses
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication