When I look at the return, the depreciation is correct and there is one Form 4562 for each property as well as depreciation. Since you did not have any new assets placed on depreciation in 2025, this form is not actually required to be filed with the tax return.
Likewise both Schedules E have the appropriate depreciation listed on Line 18. Notice the income for property A does allow a loss of the same amount ($2,228 -$2,338) creating a zero income for Schedule E for the federal return.
California (CA): Based on my quick review, CA follows the same passive activity rules as federal since 2015. The Form 3801 correctly allows the same loss as indicated for the federal return.
- California generally follows federal conformity for Passive Activity Loss (PAL) rules under Internal Revenue Code (IRC) Section 469. This means that, like the federal rules, California limits your ability to use losses from "passive" activities (like most rental properties or businesses you don't actively run) to offset "active" income like your salary.
However, because California has different rules for some underlying items—most notably depreciation—your total allowable loss for California will often differ from your federal amount.
- IRS Form 8582: Calculating Passive Activity Losses (PALs) for Real Estate
Pennsylvania (PA): PA law has never changed. They recognize the loss of income within a category of income, however no loss in one category can offset any income in another category.
- Example: A rental loss cannot offset wages or any other class of income.
Please update if you have additional questions or details that may help clear any confusion.
@dcv115
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
