All of your passive losses that you were unable to deduct should have carried forward, and offset the gain on the sale. You shouldn't have to do anything manually. If you used TurboTax to file your tax return last year, any Passive Loss Carryovers would appear on Schedule E Wks - Carryforward to 2020 Smart Worksheet (final page - note this is a TurboTax supplemental schedule and not an IRS form). If you didn't use TurboTax last year, your Passive Loss Carryover appears on Form 8582 Page 2 Worksheet 5.
To enter your passive loss carryover in TurboTax:
- In TurboTax, open your return
- In the Search box on the top right of your screen, enter passive loss carryover, schedule e and click on Find at the right
- In the search result box, click on Jump to passive loss carryover, schedule e
- The program will take you to the Income from Rentals section. Answer Yes
- Follow the interview until to get to the screen Do any of these situations apply to this property? (see attached screenshot)
- Put a check mark next to I have passive real estate loss carried over from a prior year and click Continue
If you aren't already, I recommend you use TurboTax Desktop to resolve this issue. It has a "Forms" feature that allows you to view Forms and Schedules, and make/edit entries directly on them. If you're using TurboTax Online and want to switch to Desktop, see the following Help Article:
How do I switch from TurboTax Online to the TurboTax software?
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