Rental Real Estate Loss Allowance

Definition of 'Rental Real Estate Loss Allowance'


A federal tax deduction of up to $25,000 that is available to non-real estate professionals who own at least a 10% interest in a rental property that they actively manage and that operates at a loss during a particular tax year. Under the tax code, losses from passive activities such as rental real estate ownership normally cannot be deducted from income; the rental real estate loss allowance provides an exception to that rule.

Investopedia explains 'Rental Real Estate Loss Allowance'


To meet the active participation test, the taxpayer must make management decisions for the property. It is possible to meet this test even if the rental property is run by a management company.
As of 2009, the full deduction is available to single taxpayers with an adjusted gross income of $100,000; between $100,000 and $150,000 the deduction gradually phases out, and taxpayers with adjusted gross incomes above $150,000 may not take the deduction at all.


Filed Under:

comments powered by Disqus
Hot Definitions
  1. Quanto Swap

    A swap with varying combinations of interest rate, currency and equity swap features, where payments are based on the movement of two different countries' interest rates. This is also referred to as a differential or "diff" swap.
  2. Genuine Progress Indicator - GPI

    A metric used to measure the economic growth of a country. It is often considered as a replacement to the more well known gross domestic product (GDP) economic indicator. The GPI indicator takes everything the GDP uses into account, but also adds other figures that represent the cost of the negative effects related to economic activity (such as the cost of crime, cost of ozone depletion and cost of resource depletion, among others).
  3. Accelerated Share Repurchase - ASR

    A specific method by which corporations can repurchase outstanding shares of their stock. The accelerated share repurchase (ASR) is usually accomplished by the corporation purchasing shares of its stock from an investment bank. The investment bank borrows the shares from clients or share lenders and sells them to the company.
  4. Microeconomic Pricing Model

    A model of the way prices are set within a market for a given good. According to this model, prices are set based on the balance of supply and demand in the market. In general, profit incentives are said to resemble an "invisible hand" that guides competing participants to an equilibrium price. The demand curve in this model is determined by consumers attempting to maximize their utility, given their budget.
  5. Centralized Market

    A financial market structure that consists of having all orders routed to one central exchange with no other competing market. The quoted prices of the various securities listed on the exchange represent the only price that is available to investors seeking to buy or sell the specific asset.
  6. Balanced Investment Strategy

    A portfolio allocation and management method aimed at balancing risk and return. Such portfolios are generally divided equally between equities and fixed-income securities.
Trading Center