Part II—Special — Instruction 8582

Caution: If your filing status is married filing separately and you lived with your spouse at any time during the year, you are not eligible for the special allowances in Part II. Do not complete Part II. Instead, go to Part III of Form 8582. See the instructions for Part III, later.

Use Part II to figure the maximum amount of rental loss allowed if you have an overall loss on Part I, line 1d, from your rental real estate activities you actively participated in during 2025.

Note: If you included prior-year unallowed CRD from rental real estate activities in line 3, first figure the special $25,000 allowance for losses from rental real estate activities with active participation from Part I, line 1d, if any, without regard to the CRD, by completing lines 4 through 8. To apply any remaining portion of the $25,000 allowance to prior-year unallowed CRD from rental real estate activities, see the instructions for line 9.

Caution: If you’re claiming both the premium tax credit (PTC) and self-employed health insurance deduction (SEHID) and Part I, lines 1d and 3, of Form 8582 are both

10 Instructions for Form 8582 (2025)

losses, see Self-Employed Health Insurance Deduction and PTC in Pub. 974. You’ll have to complete worksheets in Pub. 974 before you complete Part II of Form 8582.

Enter all numbers in Part II as positive amounts (that is, greater than zero).

Example. Part II, line 4, has a loss of $42,000 (reported as a positive amount) and line 8 is $25,000. You enter $25,000 on line 9 (the smaller of line 4 or line 8, both treated as positive amounts).

Note: If you included prior-year unallowed CRD from rental real estate activities in line 3, and line 3 is a loss and line 1d is a loss, complete lines 4 through 8, then see the instructions for line 9 below. If line 1d of Part I is zero or more, and line 3 is a loss, go directly to the instructions for line 9 below.

Line 4. Enter on line 4 the smaller of the loss on Part I, line 1d, or the loss on line 3.

Example. Part I, line 1d, has a loss of $3,000 and line 2d has a gain of $100. The combined loss on line 3 is $2,900. You enter $2,900 as a positive number on Part II, line 4 (the smaller of the loss on Part I, line 1d, or the loss on line 3).

Line 5. Married persons filing separate returns who lived apart from their spouses at all times during the year must enter $75,000 on line 5 instead of $150,000.

Line 6. To figure modified adjusted gross income, combine all the amounts used to figure adjusted gross income, except don’t take into account:

Any passive activity loss as defined in section 469(d) (1),
Any rental real estate loss allowed to real estate professionals (defined under Activities That Are Not Passive Activities, earlier),

• The taxable amount of social security and tier 1 railroad retirement benefits,

Deductible contributions to traditional individual retirement accounts (IRAs) and section 501(c)(18) pension plans,
The deduction allowed for the deductible part of self-employment taxes,
The exclusion from income of interest from series EE and I U.S. savings bonds used to pay higher education expenses,
The exclusion of amounts received under an employer's adoption assistance program,
The student loan interest deduction, or
The deduction allowed for foreign-derived intangible income and global intangible low-taxed income.

Include in modified adjusted gross income any portfolio income and expenses that are clearly and directly allocable to portfolio income. Also include any income that’s treated as nonpassive income, such as overall gain from a PTP and net income from an activity or item of property subject to the recharacterization of passive income rules.

When figuring modified adjusted gross income, include any overall loss from the entire disposition of a passive activity (considered a nonpassive loss).

Example. Your adjusted gross income on line 11 of Form 1040 or Form 1040-SR is $92,000 and you have taxable social security benefits of $5,500 on line 6b. Your modified adjusted gross income is $86,500 ($92,000 – $5,500).

Line 8. Don’t enter more than $12,500 on line 8 if you’re married filing a separate return and you and your spouse lived apart at all times during the year.

Line 9. If you do not have prior-year unallowed CRD from rental real estate activities, enter the smaller of line 4 or line 8 on line 9.

If you have prior-year unallowed CRD from rental real estate activities included in line 3 of Part I, and you have a loss on line 1d and line 3 of Part I, first figure the $25,000 special allowance for losses from rental real estate activities with active participation, without regard to the CRD, by completing lines 4 through 8, then go to the Worksheet below. If line 1d of Part I is zero or more, and line 3 is a loss, complete the Worksheet below and enter the result on line 9 as described below.

The remaining portion of the $25,000 allowance, if any, is available for the prior-year unallowed CRD from rental real estate activities. Use the Worksheet to figure the maximum amount of prior year unallowed CRD allowed from rental real estate activities. Worksheet for Special Allowance for Prior Unallowed Commercial Revitalization Deductions From Rental Real Estate Activities

Enter all numbers in this calculation as positive amounts (greater than zero)

A. Enter $25,000* reduced by the amount, if any, of the smaller of Part II, line 4 or line 8 . . . . . . . . . . . . . . . . . . . $

B. Enter the loss from Part I, line 3 . . . . . . . . . . . . . . . . . $

C. Reduce line B by the amount of the smaller of Part II, line 4 or line 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

D. Enter the smallest of the amount of the prior unallowed CRD (as a positive amount), the amount on line A, or the amount on line C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Enter $12,500 (reduced by the amount, if any, of the smaller of Part II, line 4 or line 8) on line A if you’re married but filing a separate return and you and your spouse lived apart at all times during the year.

Combine line D with the smaller of line 4 or line 8 and enter the combined amount on line 9. Enter “CRD” and the dollar amount of the special allowance for CRD on the dotted line.