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Unlocking Rental Losses: How Contractors Can Use Them to Offset Real Income
Unlocking Rental Losses: How Contractors Can Use Them to Offset Real Income
Most rental losses are passive, which means they usually do not offset your W-2 income, business income, or other ordinary income.
But there are 2 big exceptions: Real Estate Professional Status and short-term rentals with the right material participation.
Owning rentals alone does not make you a real estate professional. And owning an Airbnb does not automatically mean the losses offset ordinary income. The details matter: time tests, material participation, average guest stay, and documentation.
If you structure it correctly, rental losses may become much more valuable. If you don’t, they may just sit on the return as suspended passive losses.
