1040 Schedule E (Supplemental Income and Loss)

[Min Liang]

Is it true that u can only claim up to $25k on 1040 Schedule E (Supplemental Income and Loss)??

[Eamonn McElroy]

@Min Liang

In addition to what @Michael Plaks said, it should be noted that the $25k "Mom & Pop" passive activity loss allowance is only available for rental real estate activities with 'active participation'.

As long as you actively participate in the rental activity and your AGI is within thresholds, most long-term rentals will be eligible.

AirBnBs, VRBOs, etc with an 'average period of customer use' of 7 days or less are deemed to not be rental activities for passive activity loss treatment.  These rentals would still be reported on Schedule E but would not be eligible for the $25k allowance.  Instead you must meet the higher standard of 'material participation' to make these losses non-passive, much like you would with a non-rental operating business.

The passive activity loss rules under IRC Sec 469 are very complex.  Good conversations to have with your CPA/EA to dial in your treatment and plan accordingly.