Passive Activity Loss Calculator

Passive activity losses (PALs) are losses from activities you don't materially participate in - typically rental real estate or limited partnerships. PALs can only offset passive income, not active income (salary, business). Exception: active participation in rentals allows up to 25,000 loss against active income (phased out at higher AGI).

10,000 passive income, 15,000 passive losses, active participation, AGI 80k. Net passive: -5,000. Active participation + AGI under 100k = up to 25k allowed loss. Allowed: 5,000. No carryforward needed in this case. Higher AGI or no active participation = loss limited to passive income only.

Carryforward losses: any passive losses not used this year carry forward to future years. Eventually deductible when: passive income generated (offset against), property sold (full deduction), or person actively re-engages. Important to track carefully - many investors lose track of accumulated PAL carryforwards worth thousands in future tax savings.

Quick example

With passive income of 10,000 and passive losses of 15,000 (plus active participation of 1 and adjusted gross income of 80,000), the result is 5,000.00. Change any figure and watch the output shift — it's often more useful to see the pattern than to memorise the formula.

Which inputs matter most

You enter Passive Income, Passive Losses, Active Participation (1=yes, 0=no), and Adjusted Gross Income (AGI). Not every input has equal weight. Adjusting one input at a time toward extreme values shows which ones move the result most.

What's happening under the hood

Active participation + AGI < 100k: up to 25k loss. AGI 100k-150k: phased out. AGI >150k: loss limited to passive income only. The formula is listed in full below. If the number looks off, you can retrace the calculation by hand — that's the point of showing the working.

What the headline number hides

Gross pay, net pay, and what actually lands in your account can differ by thousands depending on tax code, benefits, pension contributions, and student loan deductions. This tool isolates one piece of that picture — always pair it with a take-home calculator for the full view.

What this doesn't capture

Tax bands, pension contributions, student-loan deductions, and benefits-in-kind sit outside this calculation. The figure is the headline; your actual position depends on local tax rules and personal circumstances. Pair with a dedicated take-home calculator for the full picture.