Passive Loss

Loss from a passive activity. Passive loss rules limit the amount of a passive loss deduction to the total of other income from passive activities. There is a $25,000-per-year exception for rental real estate activities, subject to income limitations. Passive losses that have not been used as a deduction can be carried forward to subsequent years until they are used completely, or passive losses are fully deductible in the year that the taxpayer sells or disposes of their interest in the passive activity.