I sold rental property in 2017 and have passive loss carryovers. Shouldn't all passive losses now be recognized in the year of the sale?

[dboyland]

I believe the sale of my rental meets the threshold for allowing passive loss carryovers to be recognized but Turbo Tax is only recognizing the 2017 loss, which is great but I really need the previous losses to unwind in order to help offset the gain on the sale.  Since I've entered all the information to determine the gain on the sale and Turbo Tax is recognizing it, I assumed that the system would also automatically recognize that the passive loss carryovers related to this rental should now unwind, etc.  It isn't and there is no indication why.  Any assistance on this is most appreciated. 

[CathiM · Accepted solution]

Yes,  you can use your passive loss carryovers on the final Schedule E you report.  These losses go to Line 17 of your 1040 and will offset other income. You may have to enter the carryover losses manually.

Here's how you enter it:

When in your tax return, under Wages & Income, scroll down to Rental Properties and click on Update

1. Continue through the next 2 screens and on the 3rd screen click on Edit next to your property
2. Click on Update next to Property Profile, continue through the next 2 screens 
3. On the screen Do Any of These Situations Apply to This Property? check 2 boxes 
4. 1) check the box by I sold or disposed of this property in 2017
5. 2) check the box by I have passive activity real estate losses carried over from a prior year
6. On the next screen Passive Losses From Prior Years, TurboTax should have the correct NEGATIVE amounts in the boxes, if not enter those Negative numbers manually from last years tax return