TAXES > Individuals > Gross Income > Other Gains or Losses (Form 4797)

Property rentals are taxed as ordinary income and losses on rental property may offset ordinary income, however there is an income threshold whereby rental loss phases out and becomes fully nondeductible once adjusted gross income reaches $150,000 exclusive of the loss. Regardless, the maximum allowable loss per year is $25,000. In the case of a “real estate professional” the loss is deductible regardless of income level, however to qualify as a real estate professional the taxpayer must be engaged in the real estate industry (rental agent, manager, developer, financier) actively for at least 750 hours per year.
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