Taxpayer A, a single individual, has Adjusted Gross Income (AGI) of $150,000. A actively participates in a rental real estate activity that produced a $20,000 loss for the current year. A has no other passive income. How much of the rental loss can A deduct against ordinary income this year?

Generally, passive losses are only deductible against passive income. An exception allows active participants in rental real estate to deduct up to $25,000 of losses against non-passive income. However, this allowance is phased out by 50% of the amount by which AGI exceeds $100,000. Phase-out range is $100,000 to $150,000. Since A's AGI is $150,000, the allowance is fully phased out ($150k - $100k = $50k excess; $50k * 50% = $25k reduction). Deduction = $0.