Can I write off rental property losses against my W-2 income?

Limited. Up to $25,000 in losses if AGI is under $100K (phased out by $150K). Real estate professional status removes the cap entirely.

Rental property losses are subject to passive activity loss rules under Section 469. Three layers: (1) Passive losses can always offset passive income (other rental income, limited partnerships). Excess losses suspend and carry forward. (2) Active participation exception: if you have AGI under $100K and "actively participate" (make management decisions, choose tenants, approve repairs), you can deduct up to $25,000 of rental loss against ordinary income (including W-2). The $25K phases out 50 cents per dollar of AGI between $100K-$150K. Above $150K AGI, the active participation exception is eliminated. (3) Real estate professional status (REPS): if you qualify for REPS (750 hours/year, 50% of working time in RE), rental losses become non-passive and there is no cap on deduction against ordinary income. Strategies to convert suspended losses into deductible: (a) Generate passive income to absorb losses (additional rental, limited partnerships). (b) Sell the property - all suspended losses unlock at sale. (c) Spouse qualifies for REPS while other spouse works W-2 - common high-income optimization. (d) Cost segregation + bonus depreciation can create large losses; if you have REPS, these directly offset W-2 income.