Passive Activity Loss Rules

The passive activity loss rules are a set of tax rules that limit the amount of losses that can be deducted from active income. These rules are designed to prevent taxpayers from using losses from passive activities to offset their active income.

A passive activity is any activity that does not involve the active conduct of a trade or business. This includes activities such as rental real estate, limited partnerships, and S corporations.

The passive activity loss rules limit the amount of losses that can be deducted from active income to the amount of income from passive activities. Any losses that are not deductible in the current year can be carried forward to future years.

There are a few exceptions to the passive activity loss rules. For example, losses from rental real estate can be deducted against active income if the taxpayer meets certain requirements.

The passive activity loss rules can be complex, so it is important to consult with a tax professional if you have any questions.

Here are some additional details about the passive activity loss rules:

* Passive activity losses can only be deducted against passive activity income. They cannot be deducted against active income or portfolio income.
* The passive activity loss rules apply to individuals, estates, trusts, and certain closely held corporations.
* Passive activity losses can be carried forward indefinitely. However, they can only be used to offset passive activity income in future years.
* There are a few exceptions to the passive activity loss rules. For example, losses from rental real estate can be deducted against active income if the taxpayer meets certain requirements.

The passive activity loss rules can be complex, so it is important to consult with a tax professional if you have any questions.