Losses from rental real estate and businesses in which you do not materially participate. They can only offset passive income, with the excess suspended until you have passive income or sell.
Rental losses are the common trap. A $25,000 allowance exists for active participants under $100,000 of income and phases out by $150,000; above that, rental losses are suspended unless you qualify as a real estate professional.
Someone who spends more than 750 hours and more than half their working time in real property businesses and materially participates in the rentals. The records have to prove it.
Last reviewed September 15, 2026. Tax rules change; confirm current law before acting.
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