It depends. Since your ordinary business income is negative, you have no "passive income" to trigger the credit. But because the box is checked, the software is likely treating the credit as an Activ...
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It depends. Since your ordinary business income is negative, you have no "passive income" to trigger the credit. But because the box is checked, the software is likely treating the credit as an Active Business Credit that should go straight to Form 3800. However, since you have no tax liability (due to the losses), the credit can't be used and should be carried forward.
If the checkbox is on and 8582-CR is gone, check these three locations in your tax software:
Form 3800, Part III: Look for the specific credit code. Even if it’s not "allowed" this year, it should be listed here.
General Business Credit Carryforward Worksheet: TurboTax generates a specific worksheet showing the credit was generated but "unallowed due to 0 tax liability," moving it to a carryover schedule.
Schedule K-1 (Form 1065/1120-S) Basis/At-Risk Worksheets: If this is a pass-through entity, the credit might be sitting on the "Shareholder/Partner Credit Limitation" worksheet, waiting for you to have enough tax liability to "unlock" it.
Now you may ask, why does the checkbox hide form 8582-CR?
With the box UNCHECKED: TurboTax treats the rental as a standard Passive Activity. It generates Form 8582-CR to see if you have any passive income to "unlock" the credit. Since you have no passive income, the form shows the credit is suspended.
With the box CHECKED: TurboTax recognizes this as Self-Rental. Since self-rental income is "Non-Passive," the software often assumes the activity is no longer subject to the Passive Activity Credit limits (8582-CR).
The Problem: Because you have a loss (negative business income), there is no tax liability to offset. The software effectively moves the credit from the "Passive Credit" bucket (8582-CR) to the "General Business Credit Carryforward" (3800/Worksheet).
To verify if the carryover is reported on your Form 3800, look 0n line 6 or line 38 to see if it is recorded on that form.