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New Member

Passive loss from selling rental properties

we have 3 rental properties and plan to sell all of them in 2017.  we have accumulated ~$100k in passive losses.  when we sell, we will make about a $35k profit on 1, lose ~$35k on the 2nd, and likely break even on the 3rd.  how is this going to affect our 2017 taxes. 

will we lose the passive losses we have accumulated?

how does this impact depreciation on the properties?

are costs/fees associated with selling the properties also deductible?

3 Replies
Level 15

Passive loss from selling rental properties

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Level 15

Passive loss from selling rental properties

You know since you have the downloaded program you have the ability to run What If/ Test scenarios and review how the loss is handled on the Sch E and the sale on the form 4797.  You will also get an idea of what the tax liability will be like so you can make an estimated payment if needed. 

If you want to play around with different figures and tax scenarios without affecting your original return you can

In the TurboTax CD/Download software by creating a test copy:

1.  Open your return in TurboTax.

2.  From the File menu, choose Save As.

3.  Give the copy a new name to distinguish it from the original (for example, by adding "Test" or "Example" to the file name).

4. Click  Save. You are now safely working in the test copy and anything you do here will not affect the original.


Or use the WHAT IF tool:

- Click Forms Icon (upper right of screen) or Ctrl 2 (forms view)

- Click on the Open Form Icon

- In the “Type a form name.” area type What-If (with the dash), click on the name of the worksheet - click on Open Form

- You will see the worksheet on the right side of the screen; enter the information right into the form

- To get back to interview mode - click on the Step-by-Step Icon (upper right of screen) or Ctrl 1

Level 9

Passive loss from selling rental properties

The Passive Losses are fully usable in the year of the sale.  Those losses are 'ordinary' (which is good), so those losses will offset your other income (such your W-2 wages or self employment income).

The Passive Losses are fully usable, so that does not affect depreciation.  The depreciation you were able to claim (including the amount that are part of the Passive Losses) lowers your Basis of the properties, and will affect the Gain or Loss on the properties.  The Gain based on the depreciation is taxed at your ordinary tax rates, up to 25%.

Selling costs essentially lower your Sales Price, resulting in a lower Gain or greater Loss.

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