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I am completing my personal income taxes. For this filing

year, I left my corporate...
I am completing my personal income taxes. For this filing year, I left my corporate career to manage my real estate full time. Therefore, the real estate is moving from a passive activity to an active activity. If I make this change and have passive losses from prior years I carried forward, do I lose them since now all of my rental properties and investments will be active income/losses for me versus passive investments?
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Answered in 12 minutes by:
11/13/2017
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,328
Experience: Taxes, Immigration, Labor Relations
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Income and losses arising from any rental activity are generally considered passive. A taxpayer is allowed to deduct passive activity losses only to the extent of the taxpayer's passive activity income arising from all passive activities.

However - a rental real estate activity of a taxpayer who qualifies as a real estate professional is not passive,

but the taxpayer must still materially participate in the activity for it to be treated as nonpassive.

.

Regarding suspended passive losses...

Such losses and any disallowed passive activity credit, will be treated as a deduction or credit in the next year as if they were occur in that next tax year.

You will offset income from an activity in the following year even if the activity is no longer treated as passive.

So - in the year you become a real estate professional - ALL previously disallowed losses are fully deductible for activities that are not passive.

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Lev
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