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Passive Real Estate Losses Being Allowed When Above Income Threshold

tccpg289
Level 4

Taxpayer is MFJ and has several real estate properties, some of which are active and others passive.

The software is netting them together regardless, and allowing a passive loss, despite the taxpayer having income > $500k.

What boxes within the software on Sch E limit each property so that losses are not allowed, when applicable?

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5 Comments 5
sjrcpa
Level 15

Is there passive income elsewhere?

Was something completed disposed of?


The more I know the more I don’t know.
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tccpg289
Level 4

There are other properties, some are active.

Should the passive be netting against the passive and active against active?

Trying to understand the mechanics of the software.

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sjrcpa
Level 15

For passive activities, active generally means active participation. All that does is allow up to $25,000 losses if you're below the income threshold.

Assuming that's what you have, income and losses from all properties should be netted. Although they will appear on 2 different lines on the 8582.


The more I know the more I don’t know.
Terry53029
Level 15
Level 15

Rental properties are all passive, unless your client is a real estate professional. As Susan said active or inactive only has to do with the income threshold

TaxGuyBill
Level 15

@tccpg289 wrote:

 

Should the passive be netting against the passive and active against active?


Passive losses are allowed to the extent there are passive income.

So yes, if there is some 'profit' from passive activities, the 'losses' can be used to the extent there is that passive 'income' (profit).