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Passive loss guides: suspended losses, Form 8582 and section 469
Plain-English guides to the passive activity loss rules and what happens to stuck losses when you sell.
By Hans Goldstein, Enrolled Agent, admitted to practice before the IRS ·
Short answerThese guides cover the passive activity loss rules (IRC 469) with a focus on suspended passive losses and what a sale does with them. Start with the complete guide, then follow the topic you need. Every rule is checked against the Internal Revenue Code, the regulations, IRS Publication 925 and the Form 8582 instructions, and every guide is dated.
The guides
- Suspended passive losses: the complete guide. What they are, how a sale releases them, what stays locked, and what the released loss does to your tax.
- Do passive losses offset capital gains?. Form 8582 decides how much loss is allowed. Section 1(h) decides which rate the gain pays. They are two different questions.
- Suspended losses and an installment sale. IRC 469(g)(3): the losses come out year by year as the gain is recognized.
- Suspended losses and a 1031 exchange. A 1031 frees nothing, but boot is gain the stuck losses can absorb.
- Suspended losses at death or by gift. The step-up at death can erase them. A gift moves them into basis.
- Section 469 passive activity rules. A plain map of the law: who it covers, what is passive, what is not.
- Passive vs nonpassive income. Which income can a passive loss offset? A table with the rule behind each line.
- Form 8582 explained. Who files it, how the parts work, a worked example, and where the carryover lives.
- The $25,000 rental loss allowance. Active participation, the $100,000 to $150,000 phase-out and a table by income.
- Passive loss carryover. How suspended losses carry forward, where to find the number and what can end it.
- Real estate professional status. The 750-hour and more-than-half tests, spouses, the election and the proof.
- Material participation: the seven tests. The seven tests, the short-term rental rule and the limited partner rule.
- At-risk rules (IRC 465). The test that comes before the passive loss rules, and how it interacts with them.
Play with it
Drag the sliders and watch where the released loss lands. The first lesson is the rate swap on this page. The other three cover an installment sale, the pile-up that follows a one-year sale, and a 1031 exchange with boot.
Open the Playground full screen. Rough 2026 estimate for education.
Related tools
- Capital gains tax calculator
- Depreciation recapture calculator
- 3.8% net investment income tax on a sale
- Installment sale of rental property
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Hans Goldstein is an Enrolled Agent, admitted to practice before the Internal Revenue Service. Not affiliated with or endorsed by the IRS. He is not a CPA or attorney. Education only, not tax or legal advice for your situation.