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Passive Loss / Rental Loss Deduction Checker

Determine if you qualify for the $25,000 passive loss allowance. Calculate your deductible rental losses with AGI phase-out between $100,000-$150,000. See how much you can deduct this year and what gets suspended.

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Your Modified Adjusted Gross Income (MAGI) from Form 1040

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Total passive losses from your rental property activities

About the $25,000 Passive Loss Allowance

The IRS allows certain taxpayers to deduct up to $25,000 in passive rental losses against their ordinary income each year. This is a special exception to the passive activity loss rules.

Qualification Requirements

To qualify for the $25,000 allowance, you must:

  • Actively participate in the rental activity (make management decisions like approving tenants, setting rent, approving repairs)
  • Own at least 10% of the property
  • Have Modified Adjusted Gross Income (MAGI) below the phase-out threshold

AGI Phase-Out Rules

The $25,000 allowance phases out based on your AGI:

  • AGI under $100,000: Full $25,000 allowance available
  • AGI between $100,000-$150,000: Allowance reduced by $1 for every $2 of AGI over $100,000
  • AGI over $150,000: No allowance available (fully phased out)

Suspended Losses

Any passive losses that cannot be deducted due to the AGI limitation are suspended and carried forward to future years. You can use these suspended losses:

  • In future years when your AGI is lower and you have allowance available
  • When you generate passive income from other activities to offset
  • When you sell the property (all suspended losses become fully deductible)

Real Estate Professional Exception

If you qualify as a real estate professional under IRS rules, your rental activities are not subject to passive loss limitations. Requirements include:

  • More than 50% of your personal services are in real property trades or businesses
  • You perform more than 750 hours of services in real property trades or businesses
  • You materially participate in the rental activity

Tax Form Reporting

Passive rental losses are reported on:

  • Form 8582 (Passive Activity Loss Limitations): Calculate allowable losses
  • Schedule E (Form 1040): Report rental income and expenses
  • Form 1040: Deduct allowable losses on your tax return

Example Scenario

Example: You have AGI of $125,000 and rental losses of $20,000.

  • AGI exceeds $100,000 by $25,000
  • Phase-out reduction: $25,000 ÷ 2 = $12,500
  • Available allowance: $25,000 − $12,500 = $12,500
  • Deductible loss: $12,500 (limited by allowance)
  • Suspended loss: $20,000 − $12,500 = $7,500 (carried forward)

Disclaimer: This calculator provides general guidance only. Passive activity loss rules are complex and individual circumstances vary. Consult with a qualified tax professional or CPA for advice specific to your situation. This calculator assumes you meet the active participation requirements and are not filing as married filing separately.