@Carl. there is an exception to what you posted. "Once your rental expenses get your taxable rental income to zero, that's it. You can't deduct any more. If you have any left over rental expenses, they just get carried forward to the next year where they can be deducted "IF" you have the taxable rental income to deduct them from."
the special allowance for real estate losses when there is active participation. From form 8582 instructions
Special Allowance for Rental Real Estate Activities
Active participation. If you actively participated in a passive rental real estate activity, you may be able to
deduct up to $25,000 of loss from the activity from your nonpassive income. This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities.The special allowance isn’t available if you were married, are filing a separate return for the year, and lived with your
spouse at any time during the year. Only an individual, a qualifying estate, or a qualified revocable trust that
made an election to treat the trust as part of the decedent's estate may actively participate in a rental real estate activity. Unless future regulations provide an exception, limited partners are not treated as actively participating in a partnership's rental real estate activity.
Active participation is a less stringent requirement than material participation
You may be treated as actively participating if, for example, you participated in making management decisions or arranged for others to provide services (such as repairs) in a significant and bona fide sense. Management decisions that may count as active participation include:
• Approving new tenants,
• Deciding on rental terms,
• Approving capital or repair expenditures, and
• Other similar decisions.
The maximum special allowance is:
• $25,000 for single individuals and married individuals filing a joint return for the tax year.
• $12,500 for married individuals who file separate returns for the tax year and lived apart from their spouses at all times during the tax year.
