Rental Activities — Instruction 8582

A rental activity is a passive activity even if you materially participated in the activity (unless it’s a rental real estate activity in which you materially participated and you were a real estate professional).

An activity is a rental activity if tangible property (real or personal) is used by customers or held for use by customers and the gross income (or expected gross income) from the activity represents amounts paid (or to be paid) mainly for the use of the property. It doesn’t matter whether the use is under a lease, a service contract, or some other arrangement.

However, if you meet any of the five exceptions below, the rental of the property isn’t treated as a rental activity.

The rental of property is incidental to an activity of holding property for investment if the main purpose of holding the property is to realize a gain from its appreciation and the gross rental income is less than 2% of the smaller of the unadjusted basis or the fair market value (FMV) of the property.

Unadjusted basis is the cost of the property without regard to depreciation deductions or any other basis adjustment described in section 1016.

The rental of property is incidental to a trade or business activity if:

a. You own an interest in the trade or business activity during the tax year,

b. The rental property was mainly used in the trade or business activity during the tax year or during at least 2 of the 5 preceding tax years, and

c. The gross rental income from the property is less than 2% of the smaller of the unadjusted basis or the FMV of the property.

Lodging provided for the employer's convenience to an employee or the employee's spouse or dependents is incidental to the activity or activities in which the employee performs services.

Instructions for Form 8582 (2025) 3

You customarily make the rental property available during defined business hours for nonexclusive use by various customers.
You provide property for use in a nonrental activity of a partnership, S corporation, or a joint venture in your capacity as an owner of an interest in the partnership, S corporation, or joint venture.

Example. If a partner contributes the use of property to a partnership, none of the partner's distributive share of partnership income is income from a rental activity unless the partnership is engaged in a rental activity.

Also, a partner's gross income from a guaranteed payment under section 707(c) isn’t income from a rental activity. The determination of whether the property used in the activity is provided in the partner's capacity as an owner of an interest in the partnership is made on the basis of all the facts and circumstances.

Reporting Income and Losses From the Activities If an activity meets any of the five exceptions listed above, it’s not a rental activity. You must then determine:

Whether your rental of the property is a trade or business activity (see Trade or Business Activities , earlier), and, if so,
Whether you materially participated in the activity for the tax year (see Material Participation , later).

If the activity is a trade or business activity in which you didn’t materially participate, enter the income and losses from the activity in Part V.

If the activity is a trade or business activity in which you did materially participate, report any income or loss from the activity on the forms or schedules normally used.

If the rental activity didn’t meet any of the five exceptions, it’s generally a passive activity. However, special rules apply if you conduct the rental activity through a publicly traded partnership (PTP) or if any of the rules described under Recharacterization of Passive Income , later, apply. Also see the PTP rules, later.

If none of the special rules apply, enter the income and losses from the passive rental activity in Parts IV or V. See the instructions for Parts IV and V for details.