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February 24, 2024 | read

Suspended Passive Losses

Brandon Hall

Suspended Passive Losses

As a landlord, your rental activities generate passive income or passive losses. If the rentals, in the aggregate, generate a passive loss, you will have a passive activity loss. You will be able to take up to $25,000 in passive activity losses and apply them against your ordinary income as long as your Modified Adjusted Gross Income stays below $100,000. You may also be able to qualify as a real estate professional and deduct an unlimited amount of passive activity losses.

However, if you cannot deduct your loss because your Modified Adjusted Gross Income exceeds $150,000 or you cannot qualify as a real estate professional, you will have a suspended passive loss. These suspended losses are not lost, rather they are carried forward indefinitely until either of two things happens:

  • You have future rental income (or other passive income) you can deduct them against, or
  • You dispose of your entire interest in the property.

If you made a grouping election under IRS Regs. Sec. 1.469-9(g), disposing of one rental property in the group of rentals may not trigger the suspended passive losses. Be careful making this grouping election and make sure you speak to a CPA prior to implementing. Suspended Passive Losses

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