By Cathy Peters
As a general rule, rental income is passive income and is included in the definition of net investment income subject to the 3.8% net investment income tax. The final regulations provide a special rule for self-rented property. In situations in which rental income is required to be treated as nonpassive for the passive loss rules (generally when the taxpayer rents property for use in an activity in which the taxpayer materially participates, or when the activity is grouped with a nonpassive trade or business), the gross rental income will be deemed to be derived in the ordinary course of a trade or business and therefore, not considered net investment income subject to the net investment income tax. Gain or loss from the sale of the property will also be treated as gain or loss from the disposition of property held in a nonpassive trade or business and therefore exempt from the net investment income tax.
If you have rental properties and certain requirements are met, there are some opportunities available that could be beneficial to you. If you would like to discuss these opportunities, please call our office for an appointment.