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Can we apply passive loss carryover when we converted our rental to personal use when it was rented 45 days. .

We have $30k in passive loss carryover.  I need to know if the $25k special rule applies when the rental was only partial year and we converted to our residence.   
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6 Replies

Can we apply passive loss carryover when we converted our rental to personal use when it was rented 45 days. .

Passive losses can be used to offset passive income.

 

Suspended passive losses are released upon a sale to an unrelated third party in a fully taxable transaction.

 

The $25,000 special allowance for active participation is calculated on an annual basis; there is no carryover of the unused part of the allowance.

 

See https://www.irs.gov/publications/p527#en_US_2023_publink1000219124

Can we apply passive loss carryover when we converted our rental to personal use when it was rented 45 days. .

I read the references.  It appears I can take the loss carryover.  Agree?  It’s not prohibited in the “caution” area.  

Can we apply passive loss carryover when we converted our rental to personal use when it was rented 45 days. .

You can use up to $25,000 in any one single tax year if you're filing a joint return and meet the income limitations.

 

If your losses exceed the $25,000 special allowance, then you can, of course, carryover any loss in excess of the $25,000.

 

Does that answer your question? 

Can we apply passive loss carryover when we converted our rental to personal use when it was rented 45 days. .

you can take the $25K provided there was active participation and your modified adjusted gross income was $150K or less for 2023. see form 8582 part II. any loss not allowed is carried over, However, since you converted the property to your personal residence any non-deductible loss won't be allowed until you sell the residence in a fully taxable transaction.

 

 

Can we apply passive loss carryover when we converted our rental to personal use when it was rented 45 days. .

Yes I think it does.  It’s just strange that I cannot find any documention that says “directly” that it’s okay.  I am going take it. 

Can we apply passive loss carryover when we converted our rental to personal use when it was rented 45 days. .

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