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Commercial revitalization is the rehabilitation of a building in a distressed community. The commercial revitalization deduction (CRD) for rental real estate activities is not allowed for buildings placed in service after December 31, 2009. However, deductions may continue to be ratably taken in 2016 for buildings placed in service before January 1, 2010.

Per the IRS Instructions for Form 8582:


The special $25,000 allowance for the CRD from rental real estate activities isn’t subject to the active participation rules or modified adjusted gross income limits just discussed. The $25,000 allowance must first be applied to losses from rental real estate activities with active participation, figured without regard to the CRD (see Part II). Any remaining portion of the $25,000 allowance is available for the CRD from rental real estate activities (see Part III). 
 
Part III of Form 8582 is used to figure the maximum CRD allowed from a rental real estate activity. Married persons filing separate returns who lived with their spouses at any time during the year are not eligible for the special allowance. Married persons filing separate returns who lived apart from their spouses at all times during the year may still claim the deduction, but it is limited to $12,500 (and reduced by the amount, if any, on Form 8582, Line 10).

In the TaxAct® program, any CRD entered on Schedule K-1 (1065 or 1120S) will automatically flow to Part III of Form 8582, if applicable.


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