Get About Form 8582-CR, Passive Activity Credit Limitations

If you actively participated in a passive rental real estate activity, you may be able to deduct up to $25,000 of loss from the activity from your nonpassive income. This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities.

Form 6198 is used to figure at-risk limits. Form 8582 is used to figure passive activity limits.

Nonpassive income and losses cannot be offset with passive losses or income. For example, wages or self-employment income cannot be offset by losses from partnerships or other passive activities.

Under the passive activity rules you can deduct up to $25,000 in passive losses against your ordinary income (W-2 wages) if your modified adjusted gross income (MAGI) is $100,000 or less. This deduction phases out $1 for every $2 of MAGI above $100,000 until $150,000 when it is completely phased out.

The passive activity credit is the amount by which the sum of all your credits subject to the passive activity rules exceed your regular tax liability allocable to all passive activities for the tax year. Credits that are included in figuring the general business credit are subject to the passive activity rules.

Treatment of former passive activities. A former passive activity is an activity that was a passive activity in any earlier tax year, but isn't a passive activity in the current tax year. You can deduct a prior-year unallowed loss from the ac- tivity up to the amount of your current-year net income from the activity.

$25,000 for single individuals and married individuals filing a joint return for the tax year. $12,500 for married individuals who file separate returns for the tax year and lived apart from their spouses at all times during the tax year.

Under the passive activity rules you can deduct up to $25,000 in passive losses against your ordinary income (W-2 wages) if your modified adjusted gross income (MAGI) is $100,000 or less.