I have a vacation home rental that has an $8,000 loss. TurboTax is allowing the loss to flow to the 1040 WITHOUT limitation therefore reducing my taxable income by that amount. It has coded the loss as NPA - non passive activity. The NPA designation is technically correct but based on my research I believe the loss still has to be suspended due to the fact that the amount of my AGI does not allow any of the special $25,000 allowance to be used. According to the IRS, operating expenses for vacation homes in excess of allowable deductions cannot create a loss and are carried forward. Because of the NPA designation TT did not prepare a Form 8582 - Passive Activity Loss Limitation to carry forward the loss. What is the correct answer?
For several prior years I had another vacation rental and the losses were always suspended until I sold the unit in 2020. Each year a Form 8582 was included with my return. The essential facts this year are the same as the prior years. I used TT each of those years to prepare my taxes.
