Rental Real Estate Loss not showing on line 1b of form 8582

[user17720701181]

My schedule E shows a loss and it should be allowed, based on my income, as I'm above the passive activity loss limitation phaseout threshold. However, line 1b on form 8582 is blank and my schedule E loss is showing as fully deductible, which is incorrect. Is anyone else having this issue? Any advice is appreciated.

[ReneV4]

If Form 8582 (Passive Activity Loss Limitations) is blank and your Schedule E loss is showing as fully deductible, that means that the software is treating your rental property as non-passive activity. Here are possible reasons:

• If you accidentally claimed "Real Estate Professional" status and that you materially participated in the rental, the losses become non-passive and fully deductible. Therefore, check to see if you indicated "Real Estate Professional"
• If the average period of customer use for your property is 7 days or less (short-term rentals), the IRS no longer categorizes it as a rental activity under the passive loss rules
• If you sold the property or completely disposed of it, the passive loss limitations are lifted, so check to ensure you did not accidentally check that you sold the property
• If you have offsetting passive income from another source, the software will use your Schedule E rental loss to offset that passive income, making it appear fully deductible

To correct the above, review the questions in each section, paying close attention to questions asking about being a "Real Estate Professional", materially participated, tenant occupancy durations and whether you sold the property.

[AmeliesUncle]

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@user17720701181 wrote:

My schedule E shows a loss and it should be allowed, based on my income, as I'm above the passive activity loss limitation phaseout threshold. However, line 1b on form 8582 is blank and my schedule E loss is showing as fully deductible, which is incorrect. Is anyone else having this issue? Any advice is appreciated.

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Can you clarify?

Do you mean your income is BELOW the limits, so you are allowed the loss (up to $25,000)?   Or did you mean your income is too high, so you should not be allowed any loss?

Is your loss over $25,000, and that is why you think the Schedule E allowable loss is wrong?

Did you indicate you are a Real Estate Professional?

Did you indicate that you "Materially Participate"?

Did you indicate that you "Actively Participate"?

[user17720701181]

Thanks for responding, although I don't think those situations apply.

- I did not check the boxes for Real Estate Professional as I agree that the losses would be allowable if I were a RE Pro. I'm not an RE Pro and my income is over $150k, so the losses shouldn't be allowable.

- Rental Days were 254.

- Property was not sold, so I didn't free up suspended losses by exiting the activity.

- No offsetting passive activity income.

In the past, my losses were transferred to line 1b and then showed as a disallowed loss carryover. I started a new return and it seems to be working now, so it may just be a glitch in the software since I started preparing my return before the depreciation schedules were ready.

[user17720701181]

Greetings and thanks for following up.

- My income is above the $150k phaseout, so the loss on my vacation rental should have transferred to line 1b of form 8582 as in the past, where the loss would be suspended and the carryover would be captured.

- I did not check the two boxes associated with a Real Estate Professional, as I agree that an RE Pro could deduct the losses without regard to the passive activity loss limitations.

- I did select "actively participate" although my loss should not be allowed due to income limitations.

It seems to be a glitch in the software, possibly because I started my return before the depreciation schedules were released. I tried creating a new return and it seems to be working so far.

[AmeliesUncle]

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@user17720701181 wrote:

- Rental Days were 254.

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Were there personal days?  If so, how many?

Was it back-and-forth between rental and personal?  Or was it 100% personal then converted to 100% rental (no personal use after that)?