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Active Participation: Use Losses From Rentals Against Your Income


If you own one or more rental properties and make less than $150k a year, this is for you.


As we know losses from rental real estate are almost always considered passive which means most people are unable to use those losses to offset their non passive income (w2, self employment, etc).


The good news is that if you can qualify for active participation and make less than $150k, this rule changes.


First off, active participation is much easier to qualify for than material participation. With active participation you just need to be involved in management decisions which means to qualify it can be as simple as approving tenants prior to entering into a lease.


Here's how the $150k comes in.


If you make less than $100k, you can use up to $25k of losses from your rentals to offset w2 or self employment income. Between $100k and $150k, the $25k is reduced to 50% of the amount of your modified adjusted gross income. After your income passes $150k you generally can't take advantage of this.


This is a great strategy to use to offset your non passive income if you meet the qualifications.


Hope this helps. If you have questions, please let me know.

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