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Beat the passive-loss rental-property rules

December 19, 2017

If you’re a savvy taxpayer, you want to deduct your business, rental, and non-rental losses whenever possible.

Why? Because these deductions put cash in your pocket (which makes the losses easier to bear). But be aware. The passive-loss rules put your legitimate tax losses into a tax-loss prison and releases them only when you have passive income (or dispose of the property).

The good news? The IRS regulations contain six non-rental exceptions to the definition of “rentals.” In most cases, the non-rental exceptions are, for tax purposes, businesses.

All will be explained when you read my article titled Tax Tips: Six Ways to Beat the Passive-Loss Rental Property Rules!

Six important non-rental exceptions.

Exception #1: Seven days or less. Properties that you rent for an average period of seven days or less are not rental properties subject to the rental real-estate rules. For details read the free article.

Exception #2: Thirty days or less. If you have a business, like a hotel or motel, when your average period of customer use is thirty days or less (and you provide significant personal services with the rental), you can come out a winner. For details read the free article.

Exception #3: Extraordinary personal services. You don’t have a rental property when you provide extraordinary personal services while making the property available for use by customers. For details read the free article.

Exception #4: Incidental. You do not have a rental property when the principal purpose for holding the property during a taxable year is to realize gain from the appreciation of the property. For details read the free article.

 Exception #5: Rental for customer use of facility. Under this exception, you customarily make the property available during defined business hours for nonexclusive use by various customers. For details read the free article.

Exception #6: Providing property. You do not have rental activity when you provide property for use in a non-rental activity of your S corporation or joint venture. For details read the free article.

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Filed Under: Passive income and losses, Rental Properties, Tax Planning

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