Passive Activity Loss (PAL) Calculator 2026

Activity Type & Losses

Activity Type

Passive Loss This Year ($)

Net loss from the passive activity before IRC 469 limitation

Prior Year PAL Carryforward ($)

Suspended losses from prior years carried forward under IRC 469(b)

Passive Income This Year ($)

Income from other passive activities. Passive losses offset passive income first. IRC 469(d).

Modified AGI ($)

MAGI for IRC 469(i) $25K allowance phaseout. Starts phasing out at $100K, gone at $150K. MFJ only.

Filing Status

Material Participation Tests • Temp. Reg. 1.469-5T

Check ALL tests that apply. Meeting any one of the seven tests constitutes material participation - the activity is then non-passive and losses are deductible without limitation. Must be documented annually.

Test 1: 500+ hours in the activity this year

Most commonly used test. Contemporaneous records required. Temp. Reg. 1.469-5T(a)(1).

Test 2: Substantially all participation was by you (regardless of hours)

Applies when few others participate. Temp. Reg. 1.469-5T(a)(2).

Test 3: 100+ hours, and not less than any other individual

You participated at least 100 hours AND more than any other person (including paid employees). Temp. Reg. 1.469-5T(a)(3).

Test 4: Significant participation activity, total 500+ hours across all SPA activities

100-499 hours each, but total across all significant participation activities exceeds 500 hours. Temp. Reg. 1.469-5T(a)(4).

Test 5: Material participant in 5 of last 10 years (any method)

Historical test. Protects long-term participants who reduce involvement. Temp. Reg. 1.469-5T(a)(5).

Test 6: Personal service activity - material participant in any 3 prior years

Applies to law, health, engineering, architecture, accounting, actuarial science, performing arts, consulting. Temp. Reg. 1.469-5T(a)(6).

Test 7: Facts and circumstances - regular, continuous, and substantial (100+ hours)

Catch-all. Must be 100+ hours. No single individual participated more. Temp. Reg. 1.469-5T(a)(7). Hardest to substantiate.

Results

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