My Schedule K-1 Box-1 loss does not lower my current tax liability

[DrDeadPan]

I filed my taxes 2 ways - one that was joint with my spouse and also tried Married filing seperately. In either case, I had a tax liability in the thousands. I then got my schedule K-1 ( not publicly traded partnership) that indicated there was an operating loss ( Box 1) in the thousands and that was incidentally more than my current liability. I immediately assumed my liability would drop considering my partnership losses and entered the K-1 details into TT only to find that it did nothing to my liability. How is this possible? 

[nexchap]

If you're a passive partner, losses will be suspended until you either a) sell the partnership of b) have income from the same type of passive activity.  If you look at the K-1 worksheet, you should see that the losses show up as suspended.

[panther]

Is there any other reason that this could be happening? Because I'm facing the same issue of K1 losses not reducing my tax liabilties even though I'm not a passive partner.

[dpowell7299]

I have this same part. NOT a passive partner and yet my total tax liability barely went down despite a $24,000 loss on the K1

[ThomasM125]

You have to be At Risk for the amount of loss in order to be able to deduct it. You will see a question about that when you enter the K-1 schedule if you have a loss. At risk means you have money invested in the ownership of the business that you haven't used up through loss deductions.

For instance, if you pay $10,000 for your partnership interest and deduct $5,000 of losses from it, you only have $5,000 at risk, so the following year you can only deduct $5,000 of losses.

It is also possible that the partnership is a passive activity itself, as would be the case if it was involved with rentals. That can also limit your ability to deduct losses.

[wineandflowers2001]

Using your example, if you have an investment of 10K and only losses of $4K, is your recourse liability (at risk)  $6K (your remaining balance) or the $4K (your actual loss)?

[AliciaP1]

A Recourse Liability is a debt owed by the partnership that the partners can be held responsible for if the partnership does not pay.  You have a share of a recourse liability owed by the partnership but it does not affect your basis in the investment.

@wineandflowers2001