Passive Activity Loss Calculator
Calculate passive activity loss limits under Form 8582 and IRC §469. See your $25k rental allowance, AGI phase-out, real estate professional treatment, and suspended loss carryforwards.
Used to calculate $25k rental allowance phase-out ($100k–$150k)
Activity 1
Enter negative number for a loss
Carryforward from prior years (positive)
Total Passive Loss
$0Allowed This Year
$0Suspended (Carryforward)
$0| Item | Amount |
|---|---|
| Gross Passive Income | $0 |
| Gross Passive Loss | $0 |
| $25k Rental Allowance (before phase-out) | $25,000 |
| Rental Allowance Applied | $0 |
| Passive Loss Allowed (Form 8582) | $0 |
| Suspended Loss (Carryforward) | $0 |
| Activity | Type | Net Income/Loss | Prior Suspended | Allowed Loss | New Suspended |
|---|---|---|---|---|---|
| act-2 | Rental RE | $0 | — | — | — |
Frequently asked questions
What are passive activity loss rules?
Passive activity loss (PAL) rules under IRC §469 limit the ability to deduct losses from passive activities against other income such as wages or business income. A passive activity is one in which you do not materially participate. Losses that cannot be deducted are "suspended" and carried forward to future years, where they can offset passive income or be released upon a qualifying disposition of the activity. Taxpayers use Form 8582 to calculate allowable passive losses.
What is the $25,000 rental allowance?
Taxpayers who actively participate in rental real estate may deduct up to $25,000 of rental losses against non-passive income each year. This allowance phases out at 50 cents per dollar of AGI above $100,000 and is fully eliminated at $150,000. Married filing separately taxpayers receive no allowance. Active participation — a lower bar than material participation — includes approving tenants, setting rents, and approving repairs.
Who qualifies as a real estate professional?
A real estate professional under IRC §469(c)(7) spends more than 750 hours per year in real estate activities and more than half of their personal services in real estate trades or businesses in which they materially participate. Qualifying taxpayers can reclassify rental losses as non-passive, allowing deduction against any income without the $25,000 cap or AGI phase-out.
What happens to suspended passive losses?
Suspended passive losses carry forward indefinitely. They are released when the activity generates sufficient passive income, when you dispose of your entire interest in the activity in a fully taxable transaction, or if you qualify as a real estate professional and materially participate. Upon a qualifying full disposition, all prior suspended losses offset any income, not just passive income.
What is the difference between active and material participation?
Active participation requires only bona fide management decisions — approving tenants, setting rents, approving expenditures. It is the threshold for the $25,000 rental allowance. Material participation is a higher standard: generally 500+ hours per year in the activity, or meeting one of 7 IRS tests (including the 100-hour test if no other participant does more). Material participation is required for real estate professionals to reclassify rental losses as non-passive.
What is Form 8582?
Form 8582 (Passive Activity Loss Limitations) is the IRS form used to compute the allowable passive activity losses on your Form 1040. It applies the $25,000 rental allowance and AGI phase-out, allocates allowed losses proportionally across activities, and tracks the carryforward balance of suspended losses for each activity.