If you own rental property, the IRS lets you use up to $25,000 in rental losses each year to offset your other income (like wages), but only if you “actively participate,” such as making key management decisions or approving new tenants. This $25,000 passive loss allowance is available if your adjusted gross income (AGI) is $100,000 or less.
As your AGI rises above $100,000, the deduction gets smaller, and by the time your AGI hits $150,000, the benefit phases out completely. If you’re over that limit, you can’t deduct rental losses against other income this year—but the unused losses will carry forward and can be used against future rental income or when you sell the property.
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