I have rental property in Georgia. I've operated at a loss for 5 years. How much of the loss can I claim on my state return? Is this entry made in the NOL section?

[AmyC]

GA begins the return with the federal AGI which  may include the rental loss. If you are an active participant and income allows a deduction, your loss is already accounted for on your federal and state.

There is a difference between a suspended loss and a net operating loss. If your suspended loss qualifies as a net operating loss, then you would claim the loss on the GA 500 NOL. 

A  GA NOL occurs when your business deductions exceed your gross income for the year. The GA NOL is related to the federal NOL.

When filing the GA form each year, your suspended losses are being tracked so that when you have a profit or sell the house, you can recoup the suspended losses. 

See IRS pub 536, NOL & 500-NOL Net Operating Loss Adjustment

[bbdennis1]

Thanks so much for the response to my question. Being that I'm a novice at preparing my taxes I still need help/further explanations when it comes to tax issues. 

The rental property is a home I used to live in before getting married and moving to another location. I didn't want to sell it so I kept it and try to rent it to at least cover the mortgage, I do not operate it as a primary source of income. The mortgage payments have far exceeded the income generated. I paid more than $7k in mortgage, in 2025 alone, than I received in rental payments. I have also operated at a loss in the previous years also.

So, my federal return, at the moment, shows a loss of over $7k on schedule E (form 1040). Can I enter the $7k loss on Ga form 500 as the NOL amount? Is that a valid/legal entry?

Also, can I claim losses from prior years on this form?

Thanks again.

[AmyC · Accepted solution]

1. Doubtful. Your rental house loss must exceed your federal AGI to have an NOL in GA (since the GA return starts with your federal AGI). Based on your comments, I believe your federal income exceeds your loss.

2. No since you probably don't have an NOL. f you have suspended losses, they are carried over on your federal tax return. Form 8582 tracks losses suspended due to income. You may not have any suspended losses, depending on your income.

Depreciation plays a big part in losses. Since your rent is low, I wonder if your house may not be a rental. It could be a second home with rental income. If your home is rented at fair rental value and the income exceeds 2% of the lower of  FMV or basis, it probably is a rental property.

See About Form 8582, Passive Activity Loss Limitations which states:

An activity is not a rental activity if any of the following apply.

1. The average period of customer use is:
   1. 7 days or less, or
   2. 30 days or less and significant personal services were provided in making the rental property available for customer use.
2. Figure the average period of customer use for a class of property by dividing the total number of days in all rental periods by the number of rentals during the tax year. If the activity involves renting more than one class of property, multiply the average period of customer use of each class by the ratio of the gross rental income from that class to the activity's total gross rental income. The activity's average period of customer use equals the sum of these class-by-class average periods weighted by gross income. See Regulations section 1.469-1(e)(3)(iii).
   Significant personal services include only services performed by individuals. To determine if personal services are significant, all relevant facts and circumstances are taken into consideration, including the frequency of the services, the type and amount of labor required to perform the services, and the value of the services relative to the amount charged for use of the property.
3. Extraordinary personal services were provided in making the rental property available for customer use. This applies only if the services are performed by individuals and the customers' use of the property is incidental to their receipt of the services.
4. Rental of the property is incidental to a nonrental activity.
   The rental of property is incidental to an activity of holding property for investment if the main purpose of holding the property is to realize a gain from its appreciation and the gross rental income is less than 2% of the smaller of the unadjusted basis or the fair market value (FMV) of the property.
   Unadjusted basis is the cost of the property without regard to depreciation deductions or any other basis adjustment described in section 1016.
   The rental of property is incidental to a trade or business activity if:
   1. You own an interest in the trade or business activity during the tax year,
   2. The rental property was mainly used in the trade or business activity during the tax year or during at least 2 of the 5 preceding tax years, and
   3. The gross rental income from the property is less than 2% of the smaller of the unadjusted basis or the FMV of the property.
5. Lodging provided for the employer's convenience to an employee or the employee's spouse or dependents is incidental to the activity or activities in which the employee performs services.
6. You customarily make the rental property available during defined business hours for nonexclusive use by various customers.