I have passive activity losses from prior years on schedule 8582 but they are shown as unallowed losses. Where do i show this on this years tax forms? Reg Tx Carryover?

[ColeenD3]

Yes, unallowed losses on Form 8582 will continue to carry forward until you sell the property. 

Form 8582 is used by noncorporate taxpayers to figure the amount of any passive activity loss (PAL) for the current tax year and to report the application of prior year unallowed PALs.

A PAL occurs when total losses (including prior year unallowed losses) from all your passive activities exceed the total income from all your passive activities.

Generally, passive activities include the following.

• Trade or business activities in which you did not materially participate for the tax year.

• Rental activities, regardless of your participation.

PALs can’t be used to offset income from nonpassive activities. However, a special allowance for rental real estate activities may allow some losses even if the losses exceed passive income.

PALs not allowed in the current year are carried forward until they’re allowed either against passive activity income; against the special allowance, if applicable; or when you sell or exchange your entire interest in the activity in a fully taxable transaction to an unrelated party.

Form 8582

[ntheath2004]

What about the situation where I have carried PAL over on form 8582 in previous years - through 2019, but in the 2020 I stopped renting the property. When I went to fill out TT for 2020, I deleted the rental property and was not prompted for the previous years PAL so it does not show up in my return for 2020. Should I manually add form 8582 to my return to show the PAL from 2019?

[DianeW777]

The carryover loss may have been removed since you deleted the rental property.  You will need that information when or if you sell the property in the future so be sure to keep the records until that time.

If you are using TurboTax CD/Download version you can add Form 8582 to your return to continue to keep the passive activity loss active as a carryforward so that the IRS has it on record. Also to use it against any potential passive income.

1. Open your TurboTax return > Change to Forms > Click Open Form above the Forms in My Return section >
2. Type 8582 in the Type a form name box > press enter > Select each page of the 8582 you need > Click Open Form
3. Manually add the information on the appropriate lines using your 2019 form

This is not available in TurboTax Online.

[gardenlover1971]

I also need to manually add a a Form 8582 for a rental property I stopped renting but have not yet sold. I tried the Open Form method @DianeW777  suggested, but the fields in the form have a blue box that won't let me type in the value from my 2019 8582. Is there any trick to making the form editable?

[ntheath2004]

I sold the property in 2021 so need to report that when I do my taxes here in a few weeks. I imagine that Turbotax will probably ask if I have sold a house, which I will indicate I have, and then it will ask for that info on that. Does the online tool ask you if you have PAL from previous years that I want to apply towards the sale gains from the sale? If not, how do I bring them forth into the return so I can apply the previous losses against the proceeds from the sale?

[ThomasM125]

@ntheath2004 You will need to set the property up for rental in your 2021 TurboTax program. like you did originally. In the profile interview section, you will see a screen that says Do any of These Situations Apply to This Property, for which one option will be I have Passive activity real estate losses carried over from a prior year. When you check that box, you will be able to enter your passive loss carryover amount. You will also see an option for I sold or disposed of this property in 2021, you need to check that box so the carryover loss will be reflected on your tax return in 2021.

After you enter your rental profile information, you need to look for the option Sale of Business Property in the Less Common Business Situations on the page that says Lets gather your business info. Update that option and indicate that you have Sales of business or rental property that you haven't already reported, and enter the sale and property information requested.

When you are finished, you will see the carryover loss reported on schedule E, line 22 and also on line 26, and it will flow to schedule 1, line 5 as a negative amount for rental real estate income. The gain or loss on the sale of the house will appear on form 4797 and schedule D. 

[ntheath2004]

Thanks @ThomasM125 . Question on setting the property up again - would that be the same as buying a home or is it added as an income source? 

[DianeW777]

You will be setting up the rental property as though it was part of your income for the current year.  The following article will walk you through the process of entering your rental property.

• Where do I enter income and expenses from a rental property?

You will need the Form 8582 from your 2020 tax return for the carryover amount to be included in your income as a loss on Schedule E, noted by @ThomasM125.  The image below will show you the entry screens from TurboTax online which will be similar to the CD/Download version.

@ntheath2004

[ntheath2004]

Thanks @DianeW777 .

The confusion I'm having is that I didn't have form 8582 in my 2020 taxes, it was last in 2019 since we didn't rent the house out during the last year. Can I just carry over the information from the 8582 from 2019 or do I need to file an amended 2020 with the 8582 before I file the 2021 taxes?

thanks,

[DaveF1006]

Yes, for best practices, file an amended 2020 Turbo Tax return to report the carryover losses from 2019. This will generate an 8582 in your 2020 return. Then file your 2021 return.

[ntheath2004]

Thanks @DaveF1006,

Do you know if the current version of the online version of TT will allow me to go back and add the 8582 to my 2020 return? Or, as mentioned above by Diane, do I need to obtain the CD version?

thanks,

[AmeliesUncle]

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@ntheath2004 wrote:

The confusion I'm having is that I didn't have form 8582 in my 2020 taxes, it was last in 2019 since we didn't rent the house out during the last year.

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Despite the fact the IRS Instructions clearly state that 8582 must continue to be filed, TurboTax does not file it if the property was no longer rented.  It is a significant error in the programming.

[ThomasM125]

@ntheath2004 You can amend your 2020 return in TurboTax for no extra charge. You will see an option for this on your Tax Home page under Your Account, and then Your tax returns & documents when you log into your TurboTax program. You will be prompted to download the program when you start the Amend/Change your return option.

@ntheath2004 

[Edited 1/13/22 at 8:07 PST]

[ntheath2004]

Thanks @ThomasM125 . So it seems once I download the TT program using the amend option, I can follow the instructions above to add the 8582 form manually with the information from my 2019 8582 since nothing changed in 2020?