Passive Activity Loss Calculator
Determine how much of your rental losses you can deduct this year
Can I deduct rental property losses against my W-2 income?
Active participants in rental real estate with Modified AGI of $100,000 or less can deduct up to $25,000 in rental losses against wages and other non-passive income. This special allowance phases out between $100K and $150K of modified AGI. Real Estate Professionals (more than 750 hours and majority of work time) can treat losses as non-passive — but only for rentals in which they also materially participate.
- $25,000 maximum allowance for active participants with modified AGI of $100K or less
- Phase-out: $0.50 reduction per $1 of modified AGI over $100,000
- Real Estate Professional status requires more than 750 hours AND majority of work time
- Suspended losses carry forward and are fully deductible when you sell your entire interest to an unrelated buyer in a fully taxable sale
Source:IRS Publication 925
Passive activity loss rules (Section 469) are why so many rental investors end up with 'phantom income' — depreciation losses that look great on paper but can't actually offset W-2 wages. Understanding the three buckets (active, passive, portfolio) is the difference between a tax-efficient portfolio and a Form 8582 graveyard.
Real-world scenario
W-2 earner with $35K rental loss tries to deduct it
Single filer, $180K W-2, owns a rental that generated a $35K paper loss (mostly depreciation). She assumes she can deduct it. Reality: the $25K special allowance phases out completely above $150K MAGI. Her entire $35K loss is suspended on Form 8582 — carried forward, deductible only against future passive income or when she sells the property.
The part most people miss
Real estate professional status (REPS) is the unlock — more than 750 hours and >50% of personal services in real estate, PLUS material participation in each rental (or in all of them together under a §469(c)(7)(A) election to treat them as one activity). With both layers met, MFJ filers can offset the other spouse's W-2 with rental losses. The IRS scrutinizes REPS claims; keep contemporaneous time logs, not retroactive estimates.
Understanding passive activity loss rules is critical for landlords, and the limits surprise many investors. This calculator shows exactly how much of your rental loss is deductible.
Can I deduct rental property losses against my W-2 income?
Active participants with modified AGI of $100,000 or less can deduct up to $25,000 in rental losses against wages. This phases out between $100K and $150K of modified AGI. Real Estate Professionals can treat losses as non-passive for rentals in which they also materially participate. Non-deductible losses are suspended and carry forward.
- •$25K max for active participants
- •Phases out $100K-$150K modified AGI
- •REP status: more than 750 hrs + majority of work time + material participation per rental
- •Suspended losses carry forward indefinitely
Your Situation
K-1 income, other rental income, etc.
Your AGI figured without passive income or losses, taxable Social Security, IRA deductions, student-loan interest, or the deductible part of self-employment tax (full list in Pub 925).
You make management decisions (approving tenants, repairs, etc.) and own at least 10% with your spouse
More than 750 hours in real property trades, and more than half of your working hours (yours only, not your spouse's)
Enter Your Information
Fill in the form to see how much of your rental loss is deductible
Special Allowance Thresholds
Set by law and not adjusted for inflation.
Sources & References
Primary references used for this content
Passive Activity and At-Risk Rules
§469 passive loss limits and material participation
View on irs.gov
Passive Activity Loss Limitations
Computes allowed and suspended passive losses
View on irs.gov
Passive activity losses and credits limited
Passive loss rules, the $25k allowance, and REPS
View on law.cornell.edu
✓3 primary sources; links re-checked on a weekly rotation by the source watcher
Disclaimer: This calculator provides estimates for educational purposes only. Not tax, legal, or financial advice. Results may vary based on your specific circumstances. Consult a qualified CPA or tax professional for personalized guidance.