Losing money on a rental can be a real problem for the average landlord, and the passive activity loss rule in the US tax codes makes it difficult to balance out that loss when it comes to deductions from your income tax. Rental losses are considered what is called a "passive loss" and cannot be deducted against anything other than "passive income." This means that If you, as the landlord, lose money on your rental home, you cannot use it to deduct from what is considered "active income" such as wages or business income. There are two exceptions to this rule: If you, as the landlord, make less than $100,000 a year in your "active income," you may deduct up to $25,000 in rental losses.The other exception is if you are a real estate professional. These individuals may deduct all passive losses related to their rental properties from their active incomes.
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