Business & farm

It's important to check your Form 8582 from 2021. This shows the current loss from passive activities as well as the ones allowed and those that must be carried over to the next year.  If you did your return with TurboTax then it should have been carried over.  Double check to see if there were any carryover losses by viewing page 1 and other sections of Form 8582. It will show if there is any unallowed loss to carryover.  If there is no carryover from 2021 to 2022, then you simply enter your K1 for 2022.

Passive Activity Phaseout Rule: 

The maximum special allowance of $25,000 ($12,500 for married individuals filing separate returns and living apart at all times during the year) is reduced by 50% of the amount of your modified adjusted gross income that’s more than $100,000 ($50,000 if you’re married filing separately). If your modified adjusted gross income is $150,000 or more ($75,000 or more if you’re married filing separately), you generally can’t use the special allowance. This is because the special allowance is reduced to $0 since the modified adjusted gross income is over the $100,000 amount.

Here are steps provided by our Tax Expert @DaveF1006 to enter your current year information and any unallowed loss carryovers:

Try this method in your TurboTax Online or TurboTax Desktop account and this should generate your 8582. .

1. Go to Federal (or Personal Income)> Income and Deductions 
2. Scroll to Business Investment and Estate/Trust Income
3. Select Schedule K-1 
4. Select edit net to the K1 you wish to edit.

After you have entered all your information about your K1 and scroll through the information that is in your boxes, there should be a screen that says Describe the Partnership.  Here you will check that: 

1. All of my investment in this activity is at risk and
2. I have at-risk losses carrying over from 2021.
3. The very next screen is titled, Enter Your At-Risk Loss Carryovers on the Form Below. 
4. In the middle of A line 1, put in your losses from a previous year. You may need to enter this twice because the program may not have recorded it the first time it was entered. Make sure you make the entry then click outside the box for it to stick
5. Next you may go to Tax Tools > Tools > Delete a form to verify it is part of your tax file -- Form 8582 should show up. 

@THorn WSOL1