Mr. and Mrs. Sturm actively manage an office building that they purchased in January 1997. This year, the office building generated a $68,000 net loss. The couple's income items consisted of $72,300 salary and $14,000 interest and dividend income. How much of the rental loss is deductible this year?

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The IRS allows up to $25,000 of real estate loss to be deducted against ordinary income if the individual actively participates in the rental activity and their modified adjusted gross income (MAGI) is $100,000 or less. The Sturms' total income ($72,300 salary + $14,000 interest and dividend income = $86,300) is below this threshold, allowing them to deduct up to $25,000 of their rental loss.

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