Passive activity losses offset passive activity income from other investments. If you don't have other passive activity income, then these losses are suspended and carried forward to other income years.
The exception to this, is if you have a modified adjusted gross income of less than $100,000 (single and married filing joint). In this case, losses can offset ordinary income such as wages, up to $25,000. The exception phases out completely at modified adjusted gross incomes of $150,000.
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