Passive Activity Loss Calculator 2026 β Rental Real Estate Deductions
Calculate how much of your rental property loss you can deduct this year. Covers the $25,000 allowance, AGI phaseout, real estate professional status, and suspended loss carryforward.
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Negative = loss (e.g. -15000). After depreciation, mortgage interest, repairs. $
Income from other passive activities (limited partnerships, etc.) $
Your total AGI excluding the rental loss. Drives the $25K phaseout. $0
Allowable Deduction This Year
$0
Estimated Tax Savings (22% bracket)
$0
Suspended Loss (Carried Forward)
$0
$25K Allowance After Phaseout
$0
AGI Headroom to Full $25K
$0
Rental Net Loss
$25,000 Allowance Phaseout Calculation
Loss Usability Summary
How to Use This Passive Activity Loss Calculator
Enter your rental property's net income or loss for the year (revenue minus all deductible expenses including depreciation, mortgage interest, property taxes, repairs, and management fees). Enter your AGI excluding the rental loss β this determines whether and how much of the $25,000 allowance applies.
Check "actively participate" if you make management decisions on the property. Check "real estate professional" only if you spend 750+ hours in real estate activities and it is more than half your working time.
The Formula
$25K Allowance Phaseout: allowance reduces by $0.50 per $1 of AGI above $100,000
Phaseout = min($25,000, max(0, ($25,000 β (AGI β $100,000) Γ 0.50)))
Loss usable = min(abs(rental loss), allowance, other passive income)
Suspended loss = rental loss β loss usable (carries forward)
Tax savings = allowable deduction Γ your marginal rate
Phaseout = min($25,000, max(0, ($25,000 β (AGI β $100,000) Γ 0.50)))
Loss usable = min(abs(rental loss), allowance, other passive income)
Suspended loss = rental loss β loss usable (carries forward)
Tax savings = allowable deduction Γ your marginal rate
Example
Maria, single, AGI $110,000, rental loss $15,000, actively participates in 2026:
AGI over $100,000: $10,000
Phaseout: $10,000 Γ 50% = $5,000
Allowance after phaseout: $25,000 β $5,000 = $20,000
Rental loss: $15,000 β fully within $20,000 allowance
Allowable deduction: $16,100
Suspended loss: $0
AGI headroom to full $25K: need AGI β€ $100,000 (currently $10,000 over)
AGI over $100,000: $10,000
Phaseout: $10,000 Γ 50% = $5,000
Allowance after phaseout: $25,000 β $5,000 = $20,000
Rental loss: $15,000 β fully within $20,000 allowance
Allowable deduction: $16,100
Suspended loss: $0
AGI headroom to full $25K: need AGI β€ $100,000 (currently $10,000 over)
Extended
Multi-Year Loss Carryforward Tracker
Track accumulated suspended losses from prior years and model when they will be released
Enter losses from prior years to track your accumulated suspended losses and see when they will be released β either through future income or property sale.
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| Year | Current Year Loss | Usable This Year | Suspended | Cumulative Suspended | Notes |
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Select your estimated sale year above to see loss release projections.
Frequently Asked Questions
What is a passive activity loss and why can't I always deduct it?
Passive activity losses (PAL) come from rental real estate and other business activities in which you do not materially participate. The IRS limits these deductions because of historical tax shelter abuses. Passive losses can generally only offset passive income β not wages, investment income, or business income. Any excess passive loss is "suspended" and carried forward to future years, where it can offset future passive income or be fully released when you sell the property.
What is the $25,000 rental real estate allowance?
As a special exception to the passive loss rules, landlords who "actively participate" in managing their rental property can deduct up to $25,000 of rental losses against ordinary income β even though rental income is technically passive. This allowance phases out for AGI between $100,000 and $150,000 (reducing by $0.50 for each $1 over $100,000), and is completely eliminated at $150,000 AGI. To qualify, you must own at least 10% of the property and make management decisions.
What does "active participation" mean for rental property?
Active participation is a lower standard than "material participation." You actively participate if you make management decisions like approving new tenants, deciding on rental terms, approving repairs and capital improvements. You do NOT need to perform physical work. Even hiring a property management company is acceptable as long as you make the major decisions. You must own at least 10% of the property. This is distinct from "real estate professional" status which requires 750+ hours per year.
What is a real estate professional for tax purposes?
A "real estate professional" under IRC Section 469(c)(7) can deduct rental losses without limit against any type of income. To qualify, you must: (1) spend more than 750 hours per year in real property trades or businesses in which you materially participate, AND (2) those hours must be more than half of your total working hours for the year. Typically this means full-time or near-full-time involvement in real estate. Spouses can combine hours only for rental activities they both participate in.
What happens to suspended passive losses when I sell the property?
When you sell a rental property in a fully taxable transaction, all previously suspended passive losses are released and become fully deductible in the year of sale. These losses can offset any type of income β your gain from the sale, wages, investment income, etc. This is sometimes called "freeing up" accumulated losses. The suspended losses are reported on Form 8582 and flow through to your Schedule E in the year of disposal.