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Level 1
posted Mar 24, 2025 8:41:30 PM

Passive Activity Loss turns Active Loss and can be used against W2?

I have rental properties and one of them commercial real estate for which we got Cost Segregation to depreciate things up front and not across 39 years thus we have so much on PASSIVE ACTIVITY LOSS accumulated. 

 

In 2024, I actively participated to manage the properties and spent more than 750 hours so I can finally designate myself as real estate professional. 

 

However Passive Loss is so much that it is more than rental income in 2024 therefore I expect the remaining loss would be deducted from our regular income but TurboTax is not doing that. Why?

 

I talked to 3 different TurboTax agents over a call and no luck yet.

 

 

0 1 1245
1 Replies
Expert Alumni
Mar 26, 2025 11:49:53 AM

The rental losses you had before you became  a real estate professional were passive losses and they remain as such even though you are now a real estate professional. Losses you sustain in 2024 going forward are not passive as long as you remain a real estate professional. So, the loss carryovers from previous years are only available going forward to offset passive income or become deductible against ordinary income when you dispose of the property.