[Verse 1] When you invest your money, there's a rule to know At-risk limitations, that's how losses flow Four sixty-five says you can only deduct what's real The amount you're liable for, that's the deal If you borrowed with no recourse, it won't count today Only what you could lose gets to reduce your pay [Chorus] Three big limits on your losses, learn them one by one At-risk, passive, and excess business when the year is done NOL and hobby rules complete the five we need to know These limitations control how much loss you get to show [Verse 2] Passive activities under four sixty-nine Material participation draws the line Seven tests to check if you're involved enough Five hundred hours or more makes the standard tough Real estate professionals get a special break But rental activities need careful steps to take [Chorus] Three big limits on your losses, learn them one by one At-risk, passive, and excess business when the year is done NOL and hobby rules complete the five we need to know These limitations control how much loss you get to show [Verse 3] Excess business losses hit when you make too much Two eighty-nine for single, five seventy-eight for joint touch These thresholds get indexed, they rise each year When your income's higher, the limit's crystal clear [Bridge] NOL carries forward with no time to end But only eighty percent of income you can spend Nine factors test if your hobby's really trade Profit motive matters in the grade they've made [Outro] From at-risk rules to passive loss Every limit has its cost Know these rules and you'll succeed These five limits are what you need
← 2 Depreciation and Cost Recovery | 4 Accounting Methods and Periods →