$25,000 Cap On Rental Losses
Someone mentioned to me I may not be subject to the cap because my full-time job is an acquisition analyst for real estate development company. Can anyone shed some light on this possibility?
If your rental property operating expenses plus depreciation is greater than your rental property income, then you have a NET passive loss from your rental property activities.
Depending upon your other ordinary income, up to $25K of net passive losses can be used to reduce the amount of your other ordinary income subject to taxes.
Taxpayers who are designated as real estate professionals can ignore the $25K cap on net passive losses. Real estate professionals have qualifying criteria to be met which include "material participation" in an active real estate trade or business. "Participation" is defined as any work done by an individual in any capacity, in connection with an activity in which the individual owns a direct or indirect interest.
Because you said you work for a company which is engaged in an active real estate trade or business, I suspect that you will not meet the material participation test unless you also have a significant ownership interest.
Please consult a professional tax advisor licensed in your area for specific details.
great information thank you.