Instructions For Form 8582 - Passive Activity Loss Limitations

2017

Department of the Treasury

Internal Revenue Service

Instructions for Form 8582

Passive Activity Loss Limitations

Rental activities, regardless of your

You don’t hold any interest in a rental

Section references are to the Internal Revenue

Code unless otherwise noted.

participation.

real estate activity as a limited partner or

as a beneficiary of an estate or a trust.

Future Developments

PALs can’t be used to offset income

If all the above conditions are met,

from nonpassive activities. However, a

For the latest developments related to

your rental real estate losses are not

special allowance for rental real estate

Form 8582 and its instructions, such as

limited, and you don’t need to complete

activities may allow some losses even if

legislation enacted after they were

Form 8582. Enter losses reported on

the losses exceed passive income.

published, go to IRS.gov/Form8582.

Schedule E (Form 1040), Supplemental

Income and Loss, Part I, line 21, on

PALs not allowed in the current year

General Instructions

Schedule E (Form 1040), Part l, line 22.

are carried forward until they’re allowed

For losses from a partnership or an S

either against passive activity income,

Reminders

corporation, enter the amount of the

against the special allowance, if

allowable loss from Schedule K-1 in

applicable, or when you sell or

Reporting prior year unallowed los-

Schedule E (Form 1040), Part II, column

exchange your entire interest in the

ses. Beginning in 2011, Form 8582

(f). Enter losses reported on line 32 of

activity in a fully taxable transaction to

must generally be filed by taxpayers

Form 4835, Farm Rental Income and

an unrelated party.

who have an overall gain (including any

Expenses, on Form 4835, line 34c.

prior year unallowed losses) from

For more information, see Pub. 925,

business or rental passive activities.

Coordination With Other

Passive Activity and At-Risk Rules.

See

Exception

under Who Must File,

Limitations

later.

Note. Corporations subject to the

Generally, PALs are subject to other

passive activity rules must use Form

Regrouping due to Net Investment

limitations (for example, basis and

8810, Corporate Passive Activity Loss

Income Tax. You may be able to

at-risk limitations) before they’re subject

and Credit Limitations.

regroup your activities if you’re subject

to the passive loss limitations. Once a

to the Net Investment Income Tax. See

Who Must File

loss becomes allowable under these

Regrouping Due to Net Investment

other limitations, you must determine

Form 8582 is filed by individuals,

Income Tax

under Grouping of

whether the loss is limited under the

estates, and trusts who have passive

Activities, later, for more information.

passive loss rules. See Form 6198,

activity deductions (including prior year

Commercial revitalization deduction

At-Risk Limitations, for details on the

unallowed losses). However, you don’t

(CRD). CRDs for rental real estate

at-risk rules. Also, capital losses that are

have to file Form 8582 if you meet the

activities aren’t allowed for buildings

allowable under the passive loss rules

following exception.

placed in service after December 31,

may be limited under the capital loss

Exception

2009. However, deductions may

limitations of section 1211. Percentage

continue to be ratably taken in 2017 for

depletion deductions that are allowable

You actively participated in rental real

buildings placed in service before

under the passive loss rules may be

estate activities (see

Special Allowance

January 1, 2010. See

Commercial

limited under section 613A(d).

for Rental Real Estate

Activities, later),

revitalization deduction

(CRD), later.

and you meet all of the following

Definitions

conditions.

Purpose of Form

Rental real estate activities with

Except as otherwise indicated, the

Form 8582 is used by noncorporate

active participation were your only

following terms in these instructions are

taxpayers to figure the amount of any

passive activities.

defined as shown below.

passive activity loss (PAL) for the

You have no prior year unallowed

Net income. This is the excess of

current tax year and to report the

losses from these (or any other passive)

current year income over current year

application of prior year unallowed

activities.

deductions from the activity. This

PALs.

Your total loss from the rental real

includes any current year gains or

estate activities wasn’t more than

losses from the disposition of assets or

A PAL occurs when total losses

$25,000 ($12,500 if married filing

an interest in the activity.

(including prior year unallowed losses)

separately).

from all your passive activities exceed

Net loss. This is the excess of current

If you’re married filing separately, you

the total income from all your passive

year deductions over current year

lived apart from your spouse all year.

activities.

income from the activity. This includes

You have no current or prior year

any current year gains or losses from

unallowed credits from a passive

Generally, passive activities include

the disposition of assets or an interest in

activity.

the following.

the activity.

Your modified adjusted gross income

Trade or business activities in which

(see the instructions for

line

7, later) was

Overall gain. This is the excess of the

you did not materially participate for the

not more than $100,000 (not more than

“net income” from the activity over the

tax year.

$50,000 if married filing separately).

Nov 29, 2017

Cat. No. 64294A

Instructions For Form 8582 - Passive Activity Loss Limitations - 2017

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