Rental Property
If You are in the
Real Estate Business, Losses are Not Limited
If you are in the real estate business, losses are
not limited
As a general rule, your passive loss deductions are limited to your
passive income. If you are a real estate professional, you are not limited
to the $25,000 rental loss limitation under the passive activity rules.
You are considered a real estate professional if you
spend more than 750 hours per year on a regular, continuous, and
substantial basis in a real estate activity and it constitutes more than
half of your personal service work for the year.
A real estate activity is defined as a real property
trade or business involved in development or redevelopment, construction
or reconstruction, acquisition, rental, management, leasing, or real
property brokerage. Each activity is considered separately unless an
election is made to group the real estate activities.
What does this mean for you? You can deduct your entire loss without
regard to the $25,000 passive loss limitation or the adjusted gross income
limitation.
