Turn Suspended Passive Losses into Tax Deductions

If you own rental real estate, you may have passive losses that have been suspended for years. Although you cannot currently deduct these losses, they are not lost forever. With proper planning, you may be able to unlock them and use them to reduce your taxes.

How to Release Suspended Passive Losses

One common way to free suspended passive losses is to sell your entire interest in a rental activity. Once released, these losses can offset other income, potentially producing significant tax savings. But not every sale works. Selling a rental property to a family member or to a corporation controlled by you or your family generally does not release suspended losses. Likewise, giving the property away can permanently reduce the tax benefit of those losses.

The 2026 Deduction Limitation

Another important planning consideration for 2026 is the excess business loss limitation. Even if you free a large amount of suspended losses through a sale, the law may limit how much you can deduct in the current year, with the remainder carried forward to future years. Because the tax consequences depend on how your properties are grouped, who buys them, and the timing of the sale, advance planning is essential.

How We Can Help

Sterling Tax and Accounting is here to help your business with tax planning!  Our comprehensive approach to tax planning helps reduce your overall tax liability and keep more money in your pocket.  If all your accountant does is file your taxes, chances are they are making you pay more than your fair share of taxes.

Learn how to proactively save on taxes by scheduling a call with our tax planning specialists. Our tax planning, accounting & business services help you stay on track. Sterling Tax & Accounting will work with you to optimize your business and minimize your taxes. We will work to provide you and your business with the tools and resources you need to build a solid tax and business foundation. We’re a trusted CPA Firm in Sarasota, Florida. We serve clients all over the US, and proactively work to minimize their taxes. Welcome to the Sterling Standard of business!  Want to learn more?  Schedule a meeting with our tax planning team.