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We keep you up to date on the latest tax changes and news in the industry.

Are Rental Losses Always Deductible?

No. A rental loss on your books does not automatically offset wages or other income on your tax return. Rental real estate is generally passive, and passive losses generally offset passive income.

Exceptions do not remove every limit

Active participation may permit a limited allowance subject to applicable requirements and income restrictions. Real estate professional status alone is insufficient: material participation must also be considered. Basis, at-risk and other loss limitations can still matter.

Track the reason for a suspended loss

Passive losses disallowed under the passive-activity rules generally carry forward, but different limitations have different consequences. Keep prior-year schedules, ownership records and participation evidence. Review those records before assuming a loss is currently deductible or available after a sale.

Official sources

Editorial source check: September 16, 2026. General information; individual facts require professional review.

Discuss your next step with JH Group CPA

Explore our tax preparation and planning or request an introductory call with our Alhambra or Irvine team. Tell us your question, the relevant tax year and any approaching deadline. Share sensitive documents only through the secure process provided by the team.

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