Definition
Tax loss from rental property when expenses exceed income, subject to passive activity limitations.
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Losses occur when expenses exceed rental income. Passive activity rules limit loss deduction. Active participation allows up to $25,000 annual deduction. Excess losses carry forward indefinitely. Suspended losses deductible at sale. Tax benefits encourage property improvement. Loss deduction reduces other income. Understanding passive activity rules critical. Professional guidance navigates complex rules. Documentation essential. Suspended losses become available eventually. Strategic property improvement increases income.
Pro Tip
Understand passive activity rules; losses can offset other income within limits.
Example
Investment property loss of $15,000 was deductible under active participation rules.