Rental Hobby

Today TaxMama hears from Kevin in Arizona, who wants to know, “How often does a rental property have to be rented or income made to qualify as a rental?
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Looking at the numbers, I doubt ours can go cash positive for at least 4 years. From reading your articles, it seems that the IRS will call it a “hobby”?”

Dear Kevin,

That’s the interesting thing about rental properties. They tend not to show a profit for many years.

That’s why IRS has all these passive loss rules and active participation rules.
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Don’t worry too much about the property being treated as a hobby just because the bottom line is a loss. If the property is rented out to a long-term tenant, in other words, someone who lives there year-round, at fair market rent, you should be fine. You may be able to deduct losses up to ,000 each year.

Any losses you can’t deduct this year will be carried to future years.

However, if the property is rented out to family members paying below-market rent, you probably won’t be able to deduct your losses at all.

The other issue your question brings up, since you asked how often it must be rented – is this a vacation property? You use it part of the time, and you rent it out part of the time?

That has a whole other set of rules. You’ll need to do some reading. You’ll find lots of information here – at .

It also has links to all relevant IRS forms and publications, here:

And remember, you can find answers to all kinds of questions about rental income and other tax issues, free. Where? Where else? At

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