Question

Rami is a real estate professional. He owns five rental properties that he manages himself. In 2024, his income for the year is $95,000 and he sustains a loss of $36,000 on his rental properties. How much of the loss can he take on his California tax return?

Answer 1

He can deduct the full $36,000 on his California return — assuming he actually qualifies as a real‑estate professional and materially participates (and meets any at‑risk rules). California follows federal passive‑activity rules, so rental losses from properties in which he materially participates are non‑passive and fully deductible against his $95,000 income (reducing taxable income to $59,000).

If he did not qualify as a real‑estate professional, the usual federal $25,000 special allowance (phased out above $100,000 AGI) or passive‑loss suspension rules would apply instead.