Investors & landlords

No, the requirements for deducting rental property losses have not changed.

Please review the requirements for reporting losses from rental activities below. If you qualify as an active participant or a real estate professional, you should review your entries in TurboTax to make sure you answered all the questions correctly. Please follow these steps to check your entries:

1. Log into TurboTax and click on any topic to continue
2. Click on Federal from the menu on the left-hand side of the screen and then click on Wages & Income at the top
3. Scroll down to “Rental, Royalties, and Farm,” click on “Show More,” then click on “Start” or “Revisit” to the right of “Rental Properties and Royalties,” and then click “Yes”
4. Carefully answer all the questions considering the definitions for an active participant and a real estate professional listed below.

Per IRS Publication 525, losses from rental activities for the tax year are not allowed unless you are one of the following:

• An "active participant" in the rental activity

• A "real estate professional"

You are considered an active participant in your rental activity if you make management decisions such as approving new tenants, deciding on rental terms, approving expenses and other management decisions. In addition, your interest in the rental activity must be at least 10% of the value of all interests in the activity throughout the year.

If you are an active participant in your rental activity, you can deduct up to $25,000 of your rental activity losses from your non-passive income. However, if your modified adjusted gross income exceeds $150,000, you are not eligible for the deduction.

You are considered a real estate professional if over half of the personal services you performed in all trades or businesses during the tax year were performed in real property trades or businesses in which you materially participated. In addition, you must spend more than 750 hours, during the tax year, working in real property trades or businesses in which you materially participated.

If you qualify as a real estate professional, then the rental activities in which you materially participated are not considered passive activities.

Please see IRS Publication 925 for more information.

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