Many tax code–defined real estate professionals wonder if they can immediately use prior passive losses once they qualify for real estate professional status.

The short answer is no, and here’s why.

IRC Section 469 Background

IRC Section 469 limits your ability to deduct passive losses to offset non-passive income, such as wages, interest, and dividends.

The passive activity rules particularly impact real estate rentals, which are per se passive by default.1

If you materially participate in a business, its income or loss is considered non-passive. But most ... Log in to view full article.