Summary of Issue
I discovered a structural limitation in TurboTax Online (Premium / Live Assisted) regarding the classification of rental real-estate activities under IRS §469.
TurboTax Online currently allows non-passive (material participation) treatment only when a taxpayer selects the Real Estate Professional path. However, under IRS Publication 925, material participation and real-estate-professional status are distinct tests:
Material participation (§469(h)): Involvement on a regular, continuous, and substantial basis (e.g., personally managing, maintaining, and operating the property).
Real-Estate-Professional (§469(c)(7)): 750+ hours and more than half of total working time in real-property trades or businesses.
A taxpayer can materially participate in a rental activity and therefore be non-passive without meeting the real-estate-professional thresholds.
TurboTax Online merges these two separate IRS standards into a single workflow, meaning:
Users who materially participate but are not real-estate professionals are automatically classified as passive,
Form 8582 (Passive Activity Loss Limitations) is generated unnecessarily, and
Legitimate current-year losses are partially or fully disallowed and carried forward, contrary to IRS rules.
This design inflates taxable income and misrepresents compliance for taxpayers who self-manage their rentals (e.g., single-property landlords who do all maintenance, leasing, and management work).
Question
Can TurboTax confirm whether the Online product will be updated to allow non-passive (material-participation) treatment for rental activities without requiring the taxpayer to select “Real Estate Professional” status?
If not, can TurboTax provide an official recommendation for users who materially participate but are not real-estate professionals — specifically, whether they must use TurboTax Desktop Home & Business to ensure correct classification and eliminate Form 8582?
Closing
I would appreciate clarification or documentation confirming how TurboTax intends to handle this distinction so that materially participating landlords can file accurately under §469(h) without being forced into the §469(c)(7) real-estate-professional election.
