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Passive Activity Loss Calculator
PAL rules restrict rental loss deductions — suspended and carried forward unless you qualify for the $25K active participation allowance. This calculator applies the phaseout and determines current-year deductible loss. Real estate professional status (REPS) unlocks full current-year deduction of rental losses. To qualify: spend more than 750 hours during the year in real property trades/businesses AND more than half of personal services in real estate. Document hours contemporaneously. Each rental property is a separate activity unless you file an election to group them — grouping is often advantageous but must be done explicitly on the return.
Currently deductible
$12,500
Suspended (carried forward)
$5,500
Your $25K allowance after phaseout
$12,500
How the math works
$18K loss, $125K MAGI, active: allowance phased to $12,500. Deductible $12,500, suspended $5,500 carried forward.
At MAGI $150K+: allowance is zero unless REPS. Strategies: reduce MAGI via 401k max, QCDs, HSA. Or qualify for REPS (750+ hours real estate, more than half of work time). REPS unlocks full current-year rental loss deduction.
How to Use
- Enter rental loss and modified AGI.
- Confirm active participation.
- See deductible portion and suspended carryforward.
Frequently Asked Questions
Active vs material participation?
Active = management decisions (approving tenants, setting rent). Material = 500+ hours/year (unlock real estate professional status). Active only qualifies for the $25K special allowance.
Phaseout?
$25K allowance phases out $1 for every $2 of MAGI over $100K. Completely phased out at MAGI $150K. Single and joint filers share same thresholds.
Suspended losses?
Carry forward indefinitely. Offset passive income in future years OR released in full when property is sold.
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