I just converted my primary residence to a rental property in 2024 (May), and am reporting a loss from it. Can I deduct this loss from my total taxable income?

[hus4lkid]

The loss is not being automatically deducted from my income, but I assume the loss should be deducted from the income I report.

[KeshaH]

Losses from rental real estate are usually not deductible until you either have packing income or the property is sold.

When you have income from rental property, this is called a passive activity. Losses from passive activities typically can't be used to offset nonpassive income. Instead, they carry over each year until you have income from passive activities that can be offset. For example, if you have a profit in 2025 from your rental property, you can offset that profit with the 2024 loss to reduce your income.

The loss that you can't deduct in the current year is called a suspended loss. If your rental property never generates a profit, you can deduct the suspended losses in the year that you sell the property.

However, you may be able to deduct up to $25,000 your loss from your rental property if you actively participate in the operations of the rental property and your income is under $150,000.

For more information, see:

- Passive activities - losses and credits

- Publication 925

- Special $25,000 allowance

[hus4lkid]

Hi Kesha, it sounds like the scenario you described with actively participating in the rental management describes my situation. How do I go about deducting that loss if that’s the case?

[JamesG1]

Within the rental property activity, make sure that you indicated that you were an active participant.

At the screen Review your rental property info, Active participant is reported in the lower left hand corner of the screen.

Access rental income by following these steps:

• Down the left side of the screen, click on Tax Home.
• Click on the down arrow to the right of Review.
• Click on the blue band labeled Review.
• Down the left side of the screen, click Federal.
• Down the left side of the screen, click Wages & Income.
• Scroll down to Rentals, Royalties, and Farm and click on the dropdown menu.
• Click to the right of Rental Properties and Royalties (Sch E).
• At the screen Your 2024 rentals and royalties summary, click the pencil to the right of the rental activity.

[hus4lkid]

Thank you! This rental property already has active participant marked as “yes”, but it doesn’t seem the loss is being deducted still. Is the income limit for this $25k exception based on gross reported income, or AGI?

[hus4lkid]

Hi! Wanted to follow up on this last message 

[PatriciaV]

The special allowance for active participation is limited based on your AGI. Review this calculation on Form 8582 Part II. Part III displays the total losses allowed that are carried over to Schedule 1 Line 5.

You can find these forms in TurboTax Desktop using the Forms icon. In TurboTax Online, you will need to download your return (including all forms) as a PDF (see Can I print a copy of my TurboTax Online return before I file it?).