Welcome and thank you for giving me the opportunity to assist you with your tax question.
The criteria is as follows:
Usually, real estate rental losses cannot be used to offset other types of income such as wages, interest, dividends and gains from investments other than rental real estate.
However, there are exceptions.
Taxpayers that actively participate in the rental real estate activity and have modified adjusted gross income of less than $100,000. If your MAGI is less than $100,000, you can claim up to $25,000 in losses from active participation rental real estate. If MAGI is between $100,000 and $150,000, the $25,000 maximum is reduced by $1 for every $2 that your MAGI exceeds $100,000. For example, if your MAGI is $140,000 you would reduce the $25,000 by $20,000 to claim up to a maximum of $5,000 in rental loss. The limits are the same for single or joint filers.
Another limited exception exists for real estate professionals. The rental losses of real estate professionals are allowed fully against other income. A real estate professional is a person that spends more than 750 hours a year involved in the real estate business such as a property manager, Realtor, developer or substantial investor.
The loss does carry forward to subsequent years using the same criteria.
Please let me know if you require further information or clarification. Thank you.