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Passive Loss Rules - Big Tax Breaks

Ever since 1984, congress has not allowed us to deduct passive losses for active and portfolio income. However, meeting some simple requirements may allow you to deduct active and portfolio income for passive losses. Do you:

  • work over half the time in real estate?

  • work over 750 hours in real estate per year (15 hours per week).

  • materially participate in your real estate?

  • own more than 10% of the real estate?

  • are you not a limited partner?

These rules may help you when selling your house as well. For example, you can essentially put your suspended losses into a drawer. Then deduct the losses against the capital gains when you sell the property.

Get professional tax advice from someone who know these rules!

Tip: Make sure you get bifurcate land and building into the four categories with IRS form 3115.

Land, personal property, building and land improvements


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