What is the maximum amount of passive rental real estate losses that may be used to offset non-passive income for taxpayers participating in rental activities in California?

What is the maximum amount of passive rental real estate losses that may be used to offset non-passive income for taxpayers participating in rental activities in California?

• A. $50,000
• B. $25,000
• C. $75,000
• D. $100,000

Answer: (B)

In California, the maximum amount of passive rental real estate losses that can be used to offset non-passive income is $25,000. This provision is particularly crucial for taxpayers who actively participate in rental activities, allowing them to offset their ordinary income with these losses, thus reducing their overall tax burden. The $25,000 threshold applies as long as the taxpayer's adjusted gross income (AGI) does not exceed $100,000. Once the AGI exceeds this limit, the allowable passive loss deduction gradually phases out, diminishing the benefit for higher-income earners. It is important for investors and real estate participants to understand this deduction limit as it informs their tax planning strategies and drives decisions related to property management and investment. Understanding this limit is crucial for landlords and real estate investors seeking to maximize their tax benefits while staying compliant with California tax laws.

In California, the maximum amount of passive rental real estate losses that can be used to offset non-passive income is $25,000. This provision is particularly crucial for taxpayers who actively participate in rental activities, allowing them to offset their ordinary income with these losses, thus reducing their overall tax burden.

The $25,000 threshold applies as long as the taxpayer's adjusted gross income (AGI) does not exceed $100,000. Once the AGI exceeds this limit, the allowable passive loss deduction gradually phases out, diminishing the benefit for higher-income earners. It is important for investors and real estate participants to understand this deduction limit as it informs their tax planning strategies and drives decisions related to property management and investment.

Understanding this limit is crucial for landlords and real estate investors seeking to maximize their tax benefits while staying compliant with California tax laws.