Passive Loss

Description and Definition of Passive Loss

Loss from a passive activity. Passive activities are investments in which you do not materially participate. Deduction of losses from passive activities is limited to the total of income from other passive activities. Passive losses generally can't be deducted against other kinds of income such as your salary, or income from interest, dividends, or capital gains. Generally, all real estate and limited partnership investments are considered passive activities but there is a limited exception for rental real estate in which you actively participate. There is a $25,000 per year exception for rental real estate activities subject to limitations for high income taxpayers. Losses you can't use because you have no passive income to offset can be carried over to future years or until you sell or dispose of your interest.

Resources

See Also

Further Reading

• Passive Loss in the West's Tax Law Dictionary
• Passive Loss in “A Dictionary of Taxation”