If you own rental property, the rental activity is generally treated by the IRS as a “passive activity.”  This is important to understand because if you operated rental property and sustained a loss, the loss can be claimed against active income, such as wages.  This loss deduction is limited to $25,000 for the claimed tax year.  The $25,000 loss deduction may be further limited by Adjusted Gross Income (AGI).  However, if you are a bona fide real estate professional, the rental activity is treated as an “active activity.”  Therefore, there is no limit on the amount of losses that can be deducted. Continue reading…