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Question
If I am married and I have ordinary income, can my spouse help turn my passive losses into active losses to offset my ordinary income?
AI accountant’s answer:
Unfortunately, your spouse cannot turn your passive losses into active losses just because they are married to you. Passive losses can only offset passive income, and cannot directly offset ordinary income like wages or salary. However, if your spouse has passive income from a separate activity, your combined passive losses and income on a joint tax return can offset each other. Keep in mind that there are specific rules for determining whether an income or loss from an activity is active or passive, and your level of participation plays a significant role. If you or your spouse have material participation in an activity, the losses from that activity may be considered active and can offset ordinary income. However, this will depend on your individual involvement in the activity and whether or not it meets the IRS's material participation requirements.
Comment from reviewer
Judah Broussard, EA, JD
Not Correct.
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