**The information below has not been verified for the 2020 tax year as the IRS Pub. 925 has not yet been released by the IRS.**
A rental activity is a passive activity even if you materially participated in that activity, unless you materially participated as a real estate professional.
Per IRS Publication 925 Passive Activity and At-Risk Rules, on page 4:
Phaseout rule. The maximum special allowance of $25,000 ($12,500 for married individuals filing separate returns and living apart at all times during the year) is reduced by 50% of the amount of your modified adjusted gross income that’s more than $100,000 ($50,000 if you’re married filing separately). If your modified adjusted gross income is $150,000 or more ($75,000 or more if you’re married filing separately), you generally can’t use the special allowance. This is because the special allowance is reduced to $0 since the modified adjusted gross income is over the $100,000 amount.
Modified adjusted gross income for this purpose is your adjusted gross income figured without the following.
Exceptions to the phaseout rules. A higher phaseout range applies to rehabilitation investment credits from rental real estate activities. For those credits, the phaseout of the $25,000 special allowance starts when your modified adjusted gross income exceeds $200,000 ($100,000 if you’re a married individual filing a separate return and living apart at all times during the year).
There is no phaseout of the $25,000 special allowance for low-income housing credits or for the CRD.
Ordering rules. If you have more than one of the exceptions to the phaseout rules in the same tax year, you must apply the $25,000 phaseout against your passive activity losses and credits in the following order.
Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.