You are correct. The business portion of income and losses go on sch E. A gain would transfer to your 1040 while a loss would not. A loss would be carried over. I am running into the same problem as you. I would like to investigate this. You can send us a “diagnostic” file that has your “numbers” but not your personal information. If you would like to do this, here are the instructions:
If you are online, go to tax tools>tools > share file with agent > 6 digit number pops up.
If on desktop, go to online >send tax file to agent > number pops.
Reply with # here and @AmyC please
All limitations and issues:
Chapter 5 of Publication 527, Residential Rental Property (Including Rental of Vacation Homes) states:
You must also determine if the dwelling unit is considered a home. The amount of rental expenses that you can deduct may be limited if the dwelling unit is considered a home. Whether a dwelling unit is considered a home depends on how many days during the year are considered to be days of personal use.
Limit on deductions.
Renting a dwelling unit that is considered a home isn’t a passive activity. Instead, if your rental expenses are more than your rental income, some or all of the excess expenses can’t be used to offset income from other sources. The excess expenses that can’t be used to offset income from other sources are carried forward to the next year and treated as rental expenses for the same property. Any expenses carried forward to the next year will be subject to any limits that apply for that year. This limitation will apply to expenses carried forward to another year even if you don’t use the property as your home for that subsequent year.
To figure your deductible rental expenses for this year and any carryover to next year, use Worksheet 5-1.
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