An IRC Section 469(c)(7)(A) Election to Aggregate Rental Real Estate Activities, is a statement written down on a piece of paper (there is not a special form to fill out) and sent with your return for the tax year of the election. You can do this in the TaxAct program and still e-file the return. This election will e-file with the federal return, but will not be transmitted to the state.
To add an election to your return, go to our Notes and Explanations for E-Filing FAQ.
The following is an example of what this election may look like:
I hereby make an election pursuant to Section 469(c)(7)(A) of the Internal Revenue Code. I am a qualified taxpayer and elect, pursuant to IRC Section 469(c)(7)(A) to treat all of my interests in rental real estate as a single activity starting with my 2022 tax return.
Per IRS Instructions for Schedule E Supplemental Income and Loss, page E-3:
The passive activity loss rules may limit the amount of losses you can deduct. These rules apply to losses in Parts I, II, and III, and line 40 of Schedule E.
Losses from passive activities may be subject first to the at-risk rules. Losses deductible under the at-risk rules are then subject to the passive activity loss rules.
You can deduct losses from passive activities in most cases only to the extent of income from passive activities. An Exception for Certain Rental Real Estate Activities (explained later) may apply.
Passive Activity
A passive activity is any business activity in which you did not materially participate and any rental activity, except as explained later. If you are a limited partner, in most cases, you are not treated as having materially participated in the partnership's activities for the year.
The rental of real or personal property is a rental activity under the passive activity loss rules in most cases, but exceptions apply. If your rental of property is not treated as a rental activity, you must determine whether it is a trade or business activity and, if so, whether you materially participated in the activity for the tax year.
See the Instructions for Form 8582 to determine whether you materially participated in the activity and for the definition of “rental activity.”
See Pub. 925 for special rules that apply to rentals of:
Activities of real estate professionals. If you were a real estate professional for 2022, any rental real estate activity in which you materially participated is not a passive activity. You were a real estate professional for the year only if you met both of the following conditions.
If you are married filing jointly, either you or your spouse must meet both of the above conditions without taking into account services performed by the other spouse.
A real property trade or business is any real property development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing, or brokerage trade or business. Services you performed as an employee are not treated as performed in a real property trade or business unless you owned more than 5% of the stock (or more than 5% of the capital or profits interest) in the employer.
If you qualify as a real estate professional, rental real estate activities in which you materially participated are not passive activities. For purposes of determining whether you materially participated in your rental real estate activities, each interest in rental real estate is a separate activity unless you elect to treat all your interests in rental real estate as one activity. To make this election, attach a statement to your original tax return that declares you are a qualifying taxpayer for the year and you are making the election under section 469(c)(7)(A). The election applies for the year made and all later years in which you are a real estate professional. You can revoke the election only if your facts and circumstances materially change.
TIP: If you did not make this election on your timely filed return, you may be eligible to make a late election to treat all your interest in rental real estate as one activity. See Rev. Proc. 2011-34, 2011-24 I.R.B. 875, available at IRS.gov/irb/2011-24_IRB#RP-2011-34.
Note that any link in the information above is updated each year automatically and will take you to the most recent version of the webpage or document at the time it is accessed.