I am filing my 2023 tax returns and Turbotax wants and explanation statement for my NOL carryforward.
(I am not required to file by the deadline b/c I have no taxable income.) I have written an explanation and wanted to know if this is adequate for the IRS.
First some background information:
I am a retired landlord and own one rental property. I also own my own home. In 2022 I had a rental loss of 2500.
B/c my deductions were greater than my income, my rental loss is a NOL as per IRS Pub 536.
In 2023 I converted some of my traditional IRA to a Roth IRA. So my 2023 total income is greater than my deductions. So now I'd like to use my NOL from 2022. I used Schedule 1 to report my NOL of 2500 on line 8a.
The IRS wants an explanation statement. Is this explanation adequate:
Net operating loss carryover from 2022. My rental property ran a loss of -2500 in 2022. 2022 non-business itemized deductions were 25000. (as per IRS Pub. 536). 2022 non-business income was 10000. (as per IRS Pub. 536). Because my 2022 deductions were greater than my 2022 income, my rental losses were not used in 2022. This disallowed loss is treated as a NOL and carried over to later years. IRS Pub. 536, says that to carryforward a NOL to a tax year after the NOL year, list the NOL deduction as a negative figure on the "Other income" line of Schedule 1.
