I am selling a rental property at a loss this year. Can the capital loss be added to my carry forward losses from previous years?

[Carl]

IT will be. Just understand that no matter what you do, the depreciation you're required to recapture "will" be taxed. No way out of that. But your carry over's will basically over time "cancel" it out.
On rental property, all carry over losses on that property are "realized" in the year you sell up to a limit. Excess can continue to carry over.

[lindajof]

what form do you use for the carry over? TT is putting the entire loss on line 14 for 2017

[TaxGuyBill]

It does not carry over, the entire loss is used in the year of the sale.

In the event the loss is large enough to create total negative income on your tax return (Line 41 of your Form 1040 would be negative), then that "Net Operating Loss" (NOL) can be carried back or carried forward.  The program should alert you to that if that happens.

[Carl]

Just keep in mind that sometimes folks forget to take into consideration the depreciation recapture, and then wonder why they have a taxable gain, when they were expecting a loss.

[larrsz]

Is any of this affected by Alternative Minimum Tax?

[Carl]

No not directly. Tax paid already is tax paid already. Do note that in the year you sell all carry forward losses are allowed against other ordinary income.

[larrsz]

Sorry to be dense, but let's say that you sell a property and the previous carried forward passive losses are $500K but income that year is also $500K. Does that in effect reduce income to $0? Is AMT triggered in this simple example, or does it not apply because it is losses on previous income?

[TaxGuyBill]

Yes, that would make your income $0.  With $0 of income, there would not be any AMT for that year.  The Passive Losses are not an adjustment for AMT.

[lindajof]

I actually found a way to carry forward  ... there's no actual line on the 1040.. I used line 21 and made it  the opposite sign to make income  zero.. and you have to file a statement that you are not carrying it back two years.  IRC Section 172 b3

[lindajof]

More facts....I inherited the house in 2007...it was appraised at $358K...... the height of the market.  Even recapturing the depreciation....and selling for $240K....I had a $70K loss..... which I didn't want to take all in 2017,     after HOURS of research ... I found the above... and made the adjustment.  So fat it's been accepted...

[TaxGuyBill]

@lindajof    No, you CAN'T do that.  You can't selectively choose not to take the loss.  You MUST claim the entire loss.  

*IF* that loss results in total negative income on your tax return (Line 41 of your 2017 Form 1040 would be negative), THEN you have a Net Operating Loss, and the program will ask you if you want to carry that EXCESS amount forward.

Again, you can NOT selectively choose not to take the loss.  You can NOT put a negative number on Line 21 just because you don't want to claim it.  If you did that, you NEED to amend your tax return to correct it.

[lindajof]

I adjusted against any and all  income I had and then made line 21 the difference so line  38 came to zero.      If it's wrong , I'm sure I'll hear from the IRS...LOL

[TaxGuyBill]

You can't do that.  You really need to amend.

As your tax return shows now, you DON'T have a Net Operating Loss to carry forward (Line 38 and Line 41 are not negative), so your losses would be permanently lost.

[lindajof]

PS...TOTAL loss was on line 14 btw