I have carry over losses on my rental property ~ will they ever expire?

[coconuttree]

"I have the same issue with carry forward losses going into a multi-member LLC.   I can't find where in TurboTax to report that carry forward loss from the property prior to it being moved into an LLC."

Were you able to get a satisfactory answer to this question? I too am seeking the same information. 

[Critter-3]

If you are moving a rental property with a PAL attached to it  to a Partnership then you need to seek local professional assistance with this matter so it is done correctly. 

[Jay410]

How do I use my suspended passive losses in turbo tax when I have a gain on another rental? It seems to only be taking away from this year and not from my suspended losses from my other property over the last 6 years. I thought my gain would be taken away from my passive losses and I will not pay taxes on it. 

[Critter-3]

Did you sell the property?   If not then the passive losses happen due to your income being too high and a cap gain cannot release a passive loss  no more than you can make orange juice out of apples.  

[Jay410]

I did not sell it. I have both of them. One has suspended losses of 40K. I know it is because my income is too high. I have a gain from another rental of 5K this year. I thought rental gains can be deducted from another rentals suspended passive losses. Does that make sense? Any help would be appreciated. 

[maroneymt]

In the year you sell a property (vacation rental), is there any limitation on the accumulated passive loss carryover?  In Turbo Tax, it has not limited any loss carryover, which is substantial.  Also, I did not have any gain from the sale of the property (I have no other business properties).

[DianeW777]

No, there is no limitation.  The passive loss carryover is the amount that would be considered the business use portion of the loss, if there was any personal use of the vacation rental.

The rental activity should be present in the return, in the year of sale, in order for the loss be populated and reflected accurately on your tax return.

The Schedule E is needed in order to enter the suspended losses, because this is the required location on the return.

You also need to report the sale of your rental property in the Rental Income & Expenses section in order to correctly report the gain or loss due to depreciation. 

In the year of sale you must indicate it was rented and at fair rental value.  It refers to the time period of the year while it was still owned. This will preserve your suspended losses and allow you to report the sale in the section called Assets/ Depreciation in the Rental section. 

[Pinevalleyite]

This trail was very helpful. I have a question though. We had a rental property since 2013. We never had any income any year, as expenses exceeded income. But I can't find a form 8582 for any years except for 2018 and 2019. Why wouldn't TurboTax have created 8582s for those other years? Could we have exceeded some sort of income limit on our W2's to show a passive loss those years? We sold in 2020 and TurboTax only shows those 2 years of losses - at $9k or so each year. In addition, on my old schedule E's, it appears the depreciation varied from year to year. Why would that be?

[AmyC]

@Pinevalleyite If your MFJ income is over $150,000 you can't deduct losses. You may have had years where the loss was not to be deducted. The disallowed losses on those years can be added to the basis when you sell the house. While, depreciation taken will be deducted from the basis.

Depreciation will vary each year due to the purchase of items. You may have done sec 179 and written off some expenses while depreciating others. Depending on what you are depreciating and how long, your depreciation will vary each year. The actual house depreciation is the same every year. Buy a stove, you have a depreciation!

[Jennda500]

I sold my rental property last year and sustained losses of $32,300. I totaled up expenses and entered the $32,300 loss on my schedule E last year (2019 taxes) . This year I have income consisting of unemployment benefits and short term capital gains from the sale of stocks along with interest in the amount of 24k. How can I take advantage of this carryover to offset the $3-4K in taxes Turbo tax is showing I owe for 2020?

[Jennda500]

I sold my rental property last year and sustained losses of $32,300. I totaled up expenses and entered the $32,300 loss on my schedule E last year (2019 taxes) . This year I have income consisting of unemployment benefits and short term capital gains from the sale of stocks along with interest in the amount of 24k. How can I take advantage of this carryover to offset the $3-4K in taxes Turbo tax is showing I owe for 2020?

[ColeenD3]

If the loss on your 2019 rental generated an NOL, you may have a portion to carry to 2020. You would have had to have a loss so big that it wiped out the balance of your income and still showed a loss on Line 9 of Schedule 1. See PUB 536 for instructions how to calculate the NOL for any possible 2020 inclusion.

What is a Net Operating Loss?

A net operating loss (NOL) results from the situation in which a business or individual has more allowable tax deductions than it has taxable income. In this case, the business has negative income, or a net operating loss. That's the bad news. But the good news is that you may be able to take that net operating loss and move it to a tax year in which you had a profit (actually, net operating income) in future years.

To have an NOL, your loss must generally be caused by deductions due to expenses from: 

• A business (but see restrictions on losses depending on types of business below)
• Losses due to casualties or theft
• Moving expenses, or
• Rental property. 

[Jennda500]

Yes! That is exactly what happened. 

For 2019 my AGI showed a negative at: -$14,334

Filing Single with no dependents.

No W2 income

Rental Income: $5904

Savings Interest: $6610

Capital Gains from Sale of rental house: $11,364

Total: $23,878

Rental Property Losses: -$32,308

For 2020 I have:

$18367 in Short Term Capital Gains

$5505 in Interest

$264 in Dividends

$27,962 in Pandemic Unemployment  Benefits.

So with $24,136 in Capital gains and interest along with the 27,962 in unemployment.

$12, 400 standard deduction

$10, 200 of the Unemployment benefits exempt from tax.

Can I use some of those losses from last year to reduce or eliminate my tax owed for 2020?

I also wasn't sure if I was supposed to enter the actual loss amount of $32, 308 or if I was supposed to only put in the "allowed" 25k deduction for last year? 

Thank you in advance for assisting with this! 🙂

[DianeW777]

You used the full loss in 2019.  In the year of disposition or sale the full carryover of passive losses and current year loss (if any) are allowed to be used against other income.  There is no carryover of any passive losses after that year.  If, as indicated, this created a net operating loss (NOL) in 2019, then you may have a loss to carry forward to your 2020 tax return.  

In your 2019 tax return there will be a worksheet showing your NOL carryforward. If you are unable to locate that you can use the worksheets.

They can be found in IRS Publication 536.  

Once you determine the correct amount, you can include the carryover in your 2020 tax return by following the steps above, placed here for your convenience.

1. Do a Search (upper right) > Type net operating loss > Press enter 
2. Click on the Jump to result
3. Enter your NOL carryforward on the screen that appears

[Jennda500]

I don't understand what you mean when you say " I used the full loss in 2019" when my AGI was in the negative?

It was (-14,334) and that's not including the standard deduction of $12,200 taking the negative down to (-26,534).

With 

No W2 income

Rental Income: $5904 ( deducted from Rental property losses below)

Savings Interest: $6610

Capital Gains from Sale of rental house: $11,364

Total: $23,878

Rental Property Losses: -$32,308 ( Already reduced by the $5904 in rental income listed above)

Standard deduction: 12, 200

So confused