What is passive loss carryover

[dixonmillerllc]

If we have losses from a prior year that do not include rentals, is the loss considered a passive loss carryover?

[maloofalyssa]

amt gain or loss

[dmintah]

8962

[PatriciaV · Accepted solution]

A passive loss carryover is created when you have more expenses than income (a loss) from passive activities in a prior year that could not be used that year. Instead, the passive loss is carried forward to future tax years to offset any passive income. The loss continues to be carried over until you use up the entire amount.

Passive Loss Carryovers can be created by any passive activity. Most come from rental properties (Schedule E). If you used TurboTax to file your tax return last year, any Passive Loss Carryovers would appear on Schedule E Wks - Carryforward to 2016 Smart Worksheet (final page - note this is a TurboTax supplemental schedule and not an IRS form). See screenshot #1 below - click to enlarge

If you had more than one property, or you didn't use TurboTax last year, Passive Loss Carryover appears on Form 8582 Page 2 Worksheet 5 (screenshot #2). For AMT, look for the same form with  "ALT MIN TAX" under the form title (screenshot #3).

[revised 3/20/17]

[Brassrat75]

There are two columns in the Smart Worksheet (Regular and AMT). The amount of carryover is different for each column. How do you decide which column to use for the carryover amounts? Also, there are several lines in this worksheet. There is no column sum, so do you just add all the lines yourself when calculating the carryover amount?

[PatriciaV]

Look for Form 8582 (regular and AMT) in your prior year return. Page 2 Worksheet 5 reports the total Passive Loss Carryover amount. Enter each type in the correct column.

[Brassrat75]

In my case, TT does not generate form 8582 (nor any of it's worksheets), I think, because my rental losses have exceed my rental income up to this point. But it does generate the worksheet as you described (Schedule E Wks - Carryforward to 2016 Smart Worksheet). This year I think I might have more income than losses, so I will need to manually enter passive loss from previous years.

[Brassrat75]

I found the worksheets in TT, BUT they are blank and there seems like no way to edit the worksheets.

[PatriciaV]

If you are manually entering passive losses from last year, you will need the prior year Form 8582 (or Sch E Wks). A loss on rental property may or may not generate passive losses, depending on what other passive income you reported that year.
You cannot edit forms directly in TurboTax Online. Manually entering info in form using TurboTax Desktop may cause an e-file reject (if so, you must file by mail).

[raza]

Does that mean I am out of luck to come back to using TurboTax if I had been filing with a tax guy for the previous couple of years and now have a bunch of passive loss carry over entries for form 8582? Does that mean I really cannot and should not use TurboTax?

I see Form 8582 p2 and worksheet 1 column c seems to have Prior Year Unallowed losses but they are blank and I cannot edit them. Same for worksheet 5 etc.

Looks like I should return my TurboTax CD for a refund. I have officially become too complicated for TurboTax it would appear.

[PatriciaV]

This question is nearly a year old. If you need help entering carryovers, please post your question in a new post on this forum.

[mashraf7]

Where is the screenshot #1 and #3

[SteveC4]

The CARES ACT now allows you to deduct a passive loss from taxable income.  Has Turbo been updated to correctly calculate that offset.

[JotikaT2]

Yes.

As long as you have entered the amount of any passive loss carryovers in your input, it will be included in your calculation of taxable income.