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.
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