The National Directory of Certified Public Accountants

Ask A CPA - Passive Activities

Will I Always Receive A Tax Benefit From The Tax Credit I Received On A K-1 From A Passive Activity?

Generally, you will not get a tax benefit from a tax credit resulting from a passive activity unless the passive activity has income that generates a tax. The tax must be equal or greater than the credit that is allocated to that passive activity to receive the full benefit of the credit. The disallowed credit may be carried forward to future years. The calculation of the allowed credit is reportable on IRS Form 8582-CR. Speak to your local CPA about the passive credits' deductibility.

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