Example

In February 2020, you bought a rental house for $135,000 (house $120,000 and land $15,000) and immediately began renting it out. In 2025, you rented it all 12 months for a

Net rental (loss) for house . . . . . . . . . . . . . . . . . . ($213)

You had a net loss for the year. Because you actively participated in your passive rental real estate activity and your loss was less than $25,000, you can deduct the loss on your return. You also meet all of the requirements for not having to file Form 8582. You use Schedule E, Part I, to report your rental income and expenses. You enter your income, expenses, and depreciation for the house in the column for Property A and enter your loss on line 22. Form 4562 isn’t required.