Categories: General Tax Terms
Passive Real Estate Losses refer to losses incurred from rental real estate activities in which the taxpayer does not materially participate.
These losses can typically only offset passive income, meaning that if a taxpayer has no other passive income, these losses may not be used to reduce their taxable income for the year.
For example, if a taxpayer owns rental properties and incurs a loss of $10,000 but does not actively manage the properties, they can only use that loss to offset income generated from other passive investments, such as another rental property or limited partnerships. If there are no other passive income sources, the loss may be carried forward to future tax years.
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