Rental PAL calculator
Rental losses are passive by default. Most investors can only deduct up to $25,000 per year — and that allowance phases out completely above $150,000 AGI. Enter your numbers to see what's actually deductible this year versus what gets suspended in carryforward.
Educational estimate — not tax advice. Passive activity determinations are fact-specific. Confirm with your CPA.
Three ways to use rental losses
The default passive classification has three exceptions — each with different requirements and tradeoffs.
AGI ≤ $100k
$25k allowance
If AGI is $100,000 or below and you actively participate (approve tenants, set rents, authorize repairs), up to $25,000 of rental losses can offset ordinary income annually. Phases out $100k–$150k. Gone above $150k.
750+ hours / majority of work time
Real Estate Professional
A Real Estate Professional (750+ hours in real property businesses, more than half of total work time) can treat rentals as non-passive — if they also materially participate in each property. Most W-2 employees can't meet the majority test.
Avg stay ≤ 7 days + 500 hrs
Short-term rental (7-day rule)
An STR with average stays of 7 days or fewer isn't a rental activity under IRC 469(c)(2). It's treated as a business for passive purposes. Material participation (typically 500+ hours) makes losses non-passive — deductible against any income.
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