Fill out 8582 (Passive Activity Loss Limitations) online
Form 8582 determines how much of your passive activity losses you can deduct in the current year. Passive activities include rental real estate and businesses in which you do not materially participate. Losses from passive activities can generally only offset passive income, with a special $25,000 rental real estate allowance for active participants.
How to fill out 8582 (Passive Activity Loss Limitations)
List all passive activities
Identify each passive activity (rental properties, limited partnerships, passive businesses) and calculate the net income or loss for each activity during the tax year.
Calculate the rental real estate allowance
If you actively participated in rental real estate and your modified AGI is under $100,000, you may deduct up to $25,000 of rental losses. This allowance phases out between $100,000 and $150,000 AGI.
Apply passive activity rules
Net passive losses against passive income. Any excess loss is disallowed for the current year and carried forward. Complete the worksheets to allocate allowed losses among your passive activities.
Report allowed losses
Enter the allowed losses on the appropriate tax schedules. Carry forward any disallowed losses to next year's Form 8582.
About 8582 (Passive Activity Loss Limitations)
Who needs this form
Taxpayers with losses from passive activities (primarily rental real estate or businesses in which they do not materially participate) who want to deduct those losses against other income. Also needed by taxpayers with prior year unallowed passive losses to carry forward.
Where to submit
File with the IRS as part of your annual federal income tax return (Form 1040). Allowed losses flow to the appropriate schedules (Schedule E for rental losses, Schedule C or other forms for business losses).
Source and content freshness
- Filing deadlines may shift for weekends and holidays. Verify due dates with official instructions.
Common mistakes to avoid
- Not understanding the $25,000 rental real estate exception (requires active participation and AGI under $150,000)
- Failing to carry forward disallowed losses to future years
- Not recognizing that real estate professionals may qualify for an exemption from passive activity rules
- Grouping passive activities incorrectly (each activity must be analyzed separately unless properly grouped)
- Forgetting to release suspended passive losses when you dispose of the entire activity
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What is the $25,000 rental real estate exception?
If you actively participate in a rental real estate activity (making management decisions like approving tenants, setting rent, approving repairs), you can deduct up to $25,000 of rental losses against non-passive income (like wages). This allowance begins to phase out when your modified adjusted gross income exceeds $100,000 and is completely eliminated at $150,000. Active participation is a lower bar than material participation. Report your rental income and expenses on Schedule E.
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