Activities That Are Not Passive Activities

The following aren’t passive activities.

Real property includes land, buildings, and other inherently permanent structures permanently affixed to land. Any interest in real property, including fee ownership, co-ownership, leasehold, option, or similar interest is real property. Tenant improvements to land, buildings, or other structures that are inherently permanent or otherwise classified as real property are real property for this purpose. See Regulations section 1.469-9(b)(2) for more definitions and information about determining whether a trade or business is a real property trade or business.

For examples of the determination of whether a trade or business is a real property trade or business, see Regulations section 1.469-9(b)(2)(iii).

Services you performed as an employee aren’t treated as performed in a real property trade or business unless you owned more than 5% of the stock (or more than 5% of the capital or profits interest) in the employer.

Note: If a rental real estate activity isn’t a passive activity for the current year, any prior-year unallowed loss is treated as a loss from a former passive activity. See Former Passive Activities, later.

3. A working interest in an oil or gas well. Your working interest must be held directly or through an entity that doesn’t limit your liability (such as a general partner interest in a partnership). In this case, it doesn’t matter whether you materially participated in the activity for the tax year.

4. Trade or business activities in which you materially participated for the tax year.

5. Any rental real estate activity in which you materially participated if you were a “real estate professional” for the tax year. If you were a real estate professional, then for purposes of determining your material participation in a rental real estate activity, each interest in rental real estate is generally a separate activity unless you elect to treat all interests in rental real estate as one activity. See Regulations section 1.469-9(g)(3) for details. For details on making this election, see the Instructions for Schedule E (Form 1040).

You were a real estate professional only if: a. More than half of the personal services you performed in trades or businesses during the tax year were performed in real property trades or businesses in which you materially participated, and

b. You performed more than 750 hours of services during the tax year in real property trades or businesses in which you materially participated.

If you’re married filing jointly, one spouse must separately meet both (2)(a) and (2)(b) without taking into account services performed by the other spouse.

A real property trade or business is any real property development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing, or brokerage trade or business.

Note: If a rental real estate activity isn’t a passive activity for the current year, any prior-year unallowed loss is treated as a loss from a former passive activity. See Former Passive Activities, later.

2 Instructions for Form 8582 (2025)

If, however, your liability was limited for part of the year (for example, you converted your general partner interest to a limited partner interest during the year), some of your income and losses from the working interest may be treated as passive activity gross income and passive activity deductions. See Temporary Regulations section 1.469-1T(e)(4)(ii). 4. The rental of a dwelling unit you used as a residence if section 280A(c)(5) applies. This section applies if you rented out a dwelling unit that you also used as a home during the year for a number of days that exceeds the greater of 14 days or 10% of the number of days during the year that the home was rented at a fair rental.

5. An activity of trading personal property for the account of owners of interests in the activity. For purposes of this rule, personal property means property that’s actively traded, such as stocks, bonds, and other securities. See Temporary Regulations section 1.469-1T(e)(6) for more details.

See Reporting Income and Losses From the Activities, later, if you meet any of the exceptions.

Exceptions An activity is not a rental activity if any of the following apply.

1. The average period of customer use is: a. 7 days or less, or b. 30 days or less and significant personal services were provided in making the rental property available for customer use.

Generally, income and losses from these activities aren’t entered on Form 8582. However, losses from these activities may be subject to limitations other than the passive loss rules.