passive losses for rental property that we did not rent this year--Schedule E errors

[cwyn]

I filled out everything in Turbotax as instructed, and then during the final check, it keeps throwing up an error on Schedule E for a property where: 

1) we did not rent it out at all this year (0 days rented out);

2) we have a passive loss carryover from a prior year

Turbotax automatically generated Schedule E based on this information that we had entered, but during the check it keeps throwing up the error "Days rented must be greater than or equal to 15.  If number of days rented is less than 15, the income and expenses should not be reported on this schedule."

However, I did not create the Schedule E--turbotax did.  I have no idea how to proceed.  It provides no guidance on how to proceed.  I am completely stuck.  I'm hoping someone here can help?

Thanks in advance!

[KrisD15]

To clarify, did you take the rental out of service in 2023? 

[cwyn]

Thanks for the reply, @KrisD15.  It is possible that we will rent it out again in future at some point, but right now it is just for personal use (for 2023 and the foreseeable future).  

[KrisD15]

In that case, you will want to indicate in the program that it was converted to personal use in 2023 in order to stop depreciation. 

Be aware that you need to record the basis and depreciation of the rental, land and any other assets listed for the rental. 

If you again use it as a rental, you will need theses numbers to again setup the rental.

If you sell the property, Depreciation Recapture may need to be addresses. 

You can always report the Passive Activity Loss on the screen found in the Rental section.

Do not enter any expenses or income. 

[cwyn]

Thanks, @KrisD15, this is helpful.  I went in and redid my answers to the various questions, and Turbotax then completely deleted the property from Turbotax.  So now I am confused in a different way--the passive losses have now disappeared, and because the property is no longer listed on my returns, there is no place to put in the passive losses.  So there appears to be no way to ever take the passive loss from this property?  I don't expect the loss to count towards anything this year, but I should be able to count them against passive income in future years, which I do expect to have at some point.  But if there is no place to put them on the return, I don't see how this can be done? 

It seems to me that the passive losses for this property should go on Form 8582 even if I don't submit a schedule E for it this year because we are not renting it out this year.  But Turbotax does not seem to do this, or permit me to do it manually? 

The options in Turbotax appear to be: 1) to correctly check the box that we did not try to rent the property in 2023 which deletes the property from Turbotax, deletes passive losses for this property from Form 8582 (but does remove the Schedule E error for this property), or 2) to put this property manually back into Turbotax but erroneously refuse to check the box that we did not try to rent the property in 2023, in which case Turbotax puts the passive losses back into Form 8582 but also generates a basically empty Schedule E (although without the prior error). For now I have done the latter, but I am concerned that this will somehow cause issues with the IRS, since I shouldn't have a Schedule E for this property at all this year (but I should be able to keep the passive losses in Form 8582)? 

There doesn't seem to be a way to keep the passive losses on Form 8582 in Turbotax without having a Schedule E?  

[ThomasM125]

Since you didn't rent the property during the year, it is correct to delete the property so a Schedule E is not generated. You need to note the passive loss carryover as you can deduct it in the year you dispose of the property or you incur passive income. In that year, you would re-enter the property into TurboTax and the passive loss carryover amount so you can generate a Schedule E on which the passive loss would be deducted. It is not clear in the instructions to Form 8582 if you need to include it with your return in a year that the passive loss is not being deducted, but there seems to be no prohibition against deducting a passive loss carryover from the previous year if the Form 8582 was not included with the return for that year.

[Edited 3/15/24 at 7:02 AM PST] @cwyn 

[cwyn]

Thanks, @ThomasM125, this is helpful.  

Unfortunately, I am already using the desktop version, and have already tried manually entering the passive losses on Form 8582 using the forms view, and Turbotax prevents me from entering anything on that form manually (I can click on the field, but when I type, nothing appears--I am blocked from actually entering anything).  I don't know if Turbotax ever reads these posts, but it would be great if this could be fixed so that I could manually enter the passive losses on that form...

[KrisD15]

Passive loss can only offset passive income. 

If you have no other passive income, the loss will carry forward year after year until you do. 

If you use this property again as a rental, or use a different property for rental activity, be sure to enter the loss that is being carried over. 

Capital Loss can be applied to earned income (within limits) but the same is not true regarding Passive Loss. 

Passive Loss 

[DIYtaxtime]

@cwyn Wondering if or how you resolved this issue.  I have the same problem, with real estate that I did not rent out during the year, and also other passive losses I need to carryforward to a schedule 8582 but no way to put them in.  I tried to enter the losses in directly but they were incorrectly being credited against my income.

[DianeW777]

If you would like to send us a “diagnostic” file that has your “numbers” but not your personal information it would help.  If you would like to do this, here are the instructions: 

TurboTax Online:

Go to the black panel on the left side of your program and select Tax Tools. 

1. Then select Tools below Tax Tools. 
2. A window will pop up which says Tools Center.  
3. On this screen, select Share my file with Agent. 
4. You will see a message explaining what the diagnostic copy is.  Click okay through this screen and then you will get a Token number. 
5. Reply to this thread with your Token number and your state. This will allow us to open a copy of your return without seeing any personal information.  

TurboTax CD/Download:

If you like, you can send a copy of your return that will be scrubbed to eliminate your personal data by using these steps:

1. Click on Online in the top left menu of TurboTax CD/Download for Windows
2. Select 'Send Tax File to Agent'
3. Write down or send an image of your token number and state then place in this issue.
4. We can then review your exact scenario for a solution.
5. Please also tell us any states included in the return. This is necessary for us to view the return.

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution. 

@DIYtaxtime