Passive Losses from Prior Years

[chapinreyes]

Hello,

It looks like turbotax imported these amounts, but I would like to validate and double check.   Where do I go and how can I check what those losses are for?  Or where they come from?  

1) both of the red boxes have the same amount.

[Mike9241]

form 8582

[PattiF]

These amounts are from prior year losses for your rental property. These are suspended passive losses that are carried forward until you are able to use them against rental income or other passive income.

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 . 

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.

Please see this from the IRS for more information.

@chapinreyes 

[chapinreyes]

Thank you PattiF

Your explanation about losses was easy to understand.

How can I find out wha the total of losses that can be claimed each year?  I ask because I may have some repairs to do on the property this year including a possible foundation issue. 

[HopeS]

It depends, on if you have net passive income or another net loss for the year of rental activity and whether they are limited. Passive activity loss rules state that passive losses can be used only to offset passive income. So you may also be able to use your prior year's passive rental losses to offset rental income in 2022.  If there are unused losses, you can carry them forward to future years.

The repairs you are planning to do will be deducted on your Schedule E for the property.  You might also need to depreciate some of these repairs depending on what they are (see rental real estate guidance below). if as a result, you generate losses in excess of the rental income then, you will carry over these losses as passive losses.

Please be aware of the differences between improvement and repairs for rental property. The cost of property improvements generally must be capitalized and depreciated over several years (by following IRS depreciation tables) rather than deducted in the year paid. By contrast, the cost of repairs can be written off in the year you pay them. Improvements are actions that materially add to the value of the property or substantially prolong its life. 

Click on the links below to review the differences:

Depreciation vs Expense.

Capital Improvements and Depreciation

You will be able to see your passive loss carryover by reviewing your prior Tax Return and printing Form 8582 and supporting worksheets. If you have not done so as yet you can download the return and include worksheets as a pdf file. 

For TurboTax Online:

1. Sign in to your TurboTax account and open your return by selecting Continue or Pick up where you left off
2. Select Tax Tools from the left menu, then Print Center (on mobile devices, tap in the upper left corner to expand the menu)
3. Select Print, save, or preview this year's return, and follow any additional instructions
4. Once your PDF opens in Adobe Acrobat Reader, select the printer icon near the top
5. Make any adjustments in the Print window and then select Print at the bottom

If you would like to print your return filed in the TurboTax CD/Download software please see the link below:

How to Print a Copy of the Return filed in TurboTax 

Review the link below for more information and steps to follow:

Passive Loss Carryovers

Rental Real Estate 

@chapinreyes 

[Edited 4/4/2023|9:46AM PST] @chapinreyes