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taxuser
New Member

How are loss from rental property carried forward? If I have a loss in a single year and an income of more than $150K, does that mean all the loss gets carried forward?

 
12 Replies
MichaelDC
New Member

How are loss from rental property carried forward? If I have a loss in a single year and an income of more than $150K, does that mean all the loss gets carried forward?

Yes. That's true. Rental property passive losses that are not deductible right away are called suspended passive losses. These deductions are not lost forever. Rather, they are carried forward indefinitely until either of two things happen:

  1. you have rental income (or other passive income) you can deduct them against, or
  2. you dispose of your entire interest in the property.

The tax rules provide that you may deduct your suspended passive losses from the profit you earn when you sell your rental property. To take this deduction, you must sell "substantially all" of your rental activity. If you own only one rental property and sell it, then you can take the deduction because that property is your entire rental activity. The same holds true if you own several properties and treat them each as separate activities for tax purposes. However, many landlords with multiple properties elect to combine them as one activity for tax purposes. In this event, if you own several rental properties and only sell one, you can't take the deduction because you won't have sold "substantially all" of your interest in your rental activity.

In addition, you must sell the property to an unrelated party—that is, a person other than your spouse, brothers, sisters, ancestors (parents, grandparents), lineal descendants (children, grandchildren), or a corporation or partnership in which you own more than 50%. And, the sale must be a taxable event—that is you must recognize income or loss for tax purposes. This means tax-deferred Section 1031 exchanges don’t count, except to the extent you recognize any taxable income. (I.R.C. §469(g).)

If you have any other details regarding this question, please feel free to post them in the comment section. 

taxuser
New Member

How are loss from rental property carried forward? If I have a loss in a single year and an income of more than $150K, does that mean all the loss gets carried forward?

Thanks @TurboTaxMichaelDC . So lets say one year because of  high income you cant deduct the losses but next year your income goes down to the level where you can deduct them, what happens then? Will the loss from prior year be applied against rental income (profit that year)? If it gets applied would it be partial or complete? I understand it will be passive income applied against passive income but can we take advantage of the loss later without selling it?
MichaelDC
New Member

How are loss from rental property carried forward? If I have a loss in a single year and an income of more than $150K, does that mean all the loss gets carried forward?

Will the loss from prior year be applied against rental income (profit that year)? If it gets applied would it be partial or complete? Yes, exactly. Those can be applied to "any subsequent passive income" to the extent of the passive income for that year and are completely released for deduction upon sale of the property. Hope that's a help.
taxuser
New Member

How are loss from rental property carried forward? If I have a loss in a single year and an income of more than $150K, does that mean all the loss gets carried forward?

@TurboTaxMichaelDC one more question, i have posted separately as well, is the loss 100% carried forward for federal taxes. What about the state tax? Turbotax is calculating NJ-BUS-1 and 2 forms to calculate ALTERNATIVE BUSINESS CALCULATION ADJUSTMENT that is reducing my losses by 50% atleast to carry over next year.
MichaelDC
New Member

How are loss from rental property carried forward? If I have a loss in a single year and an income of more than $150K, does that mean all the loss gets carried forward?

There is no distinction between active and passive losses for New Jersey purposes. You cannot carry back or carry forward such losses when reporting income on Form NJ-1040. You can deduct Federal passive losses in full in the year incurred against any gain within the same category of income, but only in the year that it occurred.

Hope this is helpful.

<a rel="nofollow" target="_blank" href="http://www.state.nj.us/treasury/taxation/pdf/current/1040i.pdf">http://www.state.nj.us/treasury/taxa...>
taxuser
New Member

How are loss from rental property carried forward? If I have a loss in a single year and an income of more than $150K, does that mean all the loss gets carried forward?

@TurboTaxMichaelDC It is still confusing to me. I am a non-resident for NJ and I do not have nay other income from NJ except one rental property income (loss for 2017). The loss was -$10,091, why does it show a line saying NJ depr Adj $5,083 and net amount in the FORM NJ-BUS-1 under Part II line 4 of -$5,008 instead of total $10,091?

Also, just to clarify for federal taxes, this total loss $10,091 I am not eligible to deduct against my gross income as my income is over $150k bracket and the deduction has phased away completely. However, to your point, can this total amount be deducted against the rental property income for 2018? All of it?

Sorry for too many questions, soo new to this, hence a lot of confusion! Thanks for your help!
mariodavirro
New Member

How are loss from rental property carried forward? If I have a loss in a single year and an income of more than $150K, does that mean all the loss gets carried forward?

On what form or line of the tax return do i manually inseet this loss carryover?
YL3
New Member

How are loss from rental property carried forward? If I have a loss in a single year and an income of more than $150K, does that mean all the loss gets carried forward?

@MichaelDC Hi, how do you verify that TurboTax has correctly captured the losses from previous years?  I sold my investment property last year and can't seem to find these losses anywhere in my return. Thank you in advance.

Carl
Level 15

How are loss from rental property carried forward? If I have a loss in a single year and an income of more than $150K, does that mean all the loss gets carried forward?

Passive losses carried over to 2020 and not allowed on your 2020 return for whatever reason will be shown on IRS Form 8582.

PART I is for rental real estate activity and the loss to be carried over to 2020 is on line "d".

If you have more than one rental property then you need to know the carry over loss for each property individually. You'll find that on page 2 of the 8582 in Worksheet 1, column (e).   The amount in column (c) is the carry over from last years 2018 return, to this year's 2019 return.

YL3
New Member

How are loss from rental property carried forward? If I have a loss in a single year and an income of more than $150K, does that mean all the loss gets carried forward?

Do you know how the amount is calculated?  I checked my previous years' returns and added the loss that were not allowed and the number doesn't match what's in TurboTax.

BOBEIKE
Returning Member

How are loss from rental property carried forward? If I have a loss in a single year and an income of more than $150K, does that mean all the loss gets carried forward?

IF YOU HAVE CARRYFORWARD LOSSES FOR RENTAL REAL ESTATE FOR NJ INCOME TAX, HOW DO YOU OFFSET THE CARRYFORWARD LOSSES AGAINST THE SALE OF THE PROPERTY? WHEN I FILL OUT FORM NJ BUS-2 & INDICATE ON LINE 5B THE CARRYFORWARD LOSS IT JUST IS ADDED TO THE CURRENT YEARS RENTAL LOSS ON LINE 4B, & THEN JUST CONTINUES TO CARRYFORWARD LINE 6B TO TAX YEAR 2021, LINE 12.

AmyC
Expert Alumni

How are loss from rental property carried forward? If I have a loss in a single year and an income of more than $150K, does that mean all the loss gets carried forward?

The carryforward losses are added to the basis when sold.

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