My allocatable expenses exceed the rental revenue.
Yes they do. They will most likely do that every single year the property is classified as rental real estate too. Here's how this works.
When you add up your deductible mortgage interest, property taxes, property insurance and then throw the depreciation you're required to take by law into the mix, those four items alone are usually enough to exceed your rental income. Then take into account your other allowed rental expenses (repairs, maintenance, etc) and you're practically guaranteed to operate at a loss "on paper" every year at tax time.
When your rental expenses get your taxable rental income to zero, then that's it. (Exception below). Any remaining expenses are just carried over to the next year where they can be deducted "if" you have the rental income to deduct them from (you won't). So with each passing year your "carry over" losses will just continue to grow.
You can't realize those losses until the tax year you sell the property. IN that year, all of your losses can be realized not only against the gain you may get on the sale, but also on your other "ordinary" income. (such as W-2 income)
EXCEPTION: If you "actively participated" in the rental activity, then once your rental expenses get your taxable rental income to zero, any remaining expenses up to a maximum of $25K can be deducted against "other" ordinary income, provided you actually have the "other" ordinary income to deduct it from. Any amount over $25 (or over the amount of your "other" taxable income) just gets carried forward to the next year.
If you do have any carry over losses to be carried over to the 2021 tax year, they'll be reflected on the IRS Form 8582. So if after you complete your 2020 tax return you find there is no form 8582, then you don't have any losses to be carried over. This would not be uncommon if you "actively participated" in the rental activity.
Per IRS publication 527 Chapter 3 page 13 here, You actively participated in a rental real estate activity if you (and your spouse) owned at least 10% of the rental property and you made management decisions or arranged for others to provide services (such as repairs) in a significant and bona fide sense. Management decisions that may count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and other similar decisions.
