The tax break for losses from passive investments begins to phase out for taxpayers higher incomes.

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The tax break for losses from passive investments does begin to phase out for taxpayers with higher incomes. This is known as the passive activity loss (PAL) rules, which limit the amount of passive losses that can be claimed on a tax return. The phase-out threshold for 2021 is $150,000 of modified adjusted gross income (MAGI) for single filers and $300,000 MAGI for married filing jointly.

The Tax Break for Losses from Passive Investments Begins to Phase