I have rental property loss and no other income. Can I carry it forward to use it in future, as I can't deduct it against any income. I am active participant 25K loss/yr.

[yog-g]

Turbotax is deducting 25K on form 1040 against 0 income and only carrying forward the balance. I would like to carry forward the whole amount and not use any loss this year.

[tagteam · Accepted solution]

You cannot carry forward the $25,000 special allowance, only suspended passive losses.

See https://www.irs.gov/publications/p925#en_US_2019_publink1000104571

[Carl]

You don't get to choose. If you actively participate then you qualify to deduct up to $25K against other ordinary income. You must do so if you have that income to claim it against.

Once the deduction is done and it gets your taxable other income to zero, then any remaining balance is carried forward. You have no say in the matter.

The SDA (special depreciation allowance) can not be carried forward.

[Anonymous]

if you have no other income that $25K would be a net operating loss.  you can make an election to carry it forward. 

[tagteam]

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@Anonymous wrote:

if you have no other income that $25K would be a net operating loss.  you can make an election to carry it forward. 

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Passive losses do not generate NOLs; any unused portion of the $25,000 special allowance cannot be carried forward.

[tagteam]

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@Carl wrote:

The SDA (special depreciation allowance) can not be carried forward.

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So there is no confusion, this is not the SDA (special depreciation allowance) we are referring to in this thread; it is the special allowance for rental real estate activities with active participation.

Special allowance for active participation: https://www.irs.gov/instructions/i8582#idm140476817099568

SDA: https://www.irs.gov/instructions/i4562#idm139765158314448

 

[qofmiwok]

Is Turbotax supposed to do this automatically?  Mine is just taking my income negative and I don't see any carryforward displayed anywhere.

[Anonymous]

form 1040 2019. note we can not see your return so it is difficult to answer fully but in general if:

taxable income negative line 11b.  this in and of itself means nothing except that you had more in expenses than income.  this could ve due to capital losses and/or the standard or itemized deductions

or

an oversimplification but an NOL is the excess of business losses and deductions over items of business income reduced by the excess of non-business income over non-business deductions

negative adjusted gross income line 8b. if positive you do likely do not have an NOL

do you have a net capital loss showing on line 6? 

if line 8b is negative and there is no loss on line 6,  then it is likely you have an NOL, you have to make a choice.  either to carry back the NOL (5 years due to the CARES Act or elect to carry forward - carryforward election must be with done on a timely filed return.

if there is an amount on line 6, reduce the loss on 8b by the loss on line 6 if any but not below $0

example 1:

line 8b:   -7000

line 6:     -3000

after reduction  -4000 negative AGI which would likely indicate an NOL

example 2:

line 8b: -2000

line 6: -3000

after reduction limited to $0  - 0 AGI - likely no NOL

use form 1045 schedule A for actual computation

https://www.irs.gov/pub/irs-pdf/f1045.pdf

[qofmiwok]

As was the case for the OP, it is all passive rental loss.  There is very little income, and a Schedule K loss $100k.  I originally thought I could do a carryforward or back because of CARES but I believe not because it's passive income and a partnership which flows through.  Anyway, TT is taking the whole $25k loss against $0 income, and giving a negative line 8 and negative AGI (line 11).  I thought the $25k was only supposed to take you down to $0, not negative.

[qofmiwok]

Any more input on this?

[Anonymous]

it depends on whether you really qualified to take the special loss deduction

Special Allowance for Rental Real Estate Activities
Active participation. If you actively participated in a passive rental real estate activity, you may be able to deduct up to $25,000 of loss from the activity from your nonpassive income. This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities.
The special allowance isn’t available if you were married, are filing a separate return for the year, and lived with your spouse at any time during the year. 

Active participation is a less stringent requirement than material participation. You may be treated as actively participating if, for example, you participated in making management decisions or arranged for others to provide services (such as repairs) in a significant and bona fide sense. Management decisions that may count as active participation include:
• Approving new tenants,
• Deciding on rental terms,
• Approving capital or repair
expenditures, and
• Other similar decisions.

so if you actively participated in the rental activity 

the $25,000 treated as not coming from a passive activity. that means that if your adjusted gross income is negative you have a NOL eligible for carryback.  as a matter of fact if it arose in 2019 it must be carried back unless the timely filed 1040 for that year elected to carry forward the NOL

[tagteam]

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@qofmiwok wrote:

.....I thought the $25k was only supposed to take you down to $0, not negative.

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It does only take you down to $0; the (unused) portion of the $25,000 special allowance cannot be used to create an NOL.

Example, you have a net rental loss of $5,000 (with active participation) and income of $85,000. You can use $5,000 of the $25,000 special allowance against the $85,000 thus reducing your income to $80,000; the remaining $20,000 of the special allowance is unused (and not carried forward).

[qofmiwok]

So you disagree with the response directly above yours?  

[tagteam]

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@qofmiwok wrote:

So you disagree with the response directly above yours?  

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Not exactly, since Section 469(i)(2) states that the offset (i.e., special allowance) shall not exceed $25,000 but an NOL can come from other (business) sources. 

[Carl]

I've read through this thread and am now thoroughly confused. It appears some are not paying attention to the details in the original post. Here's the facts.

I have rental property loss.

Fully expected since it's most common for rental to show a loss on paper at tax filing time. Especially if there's a mortgage on it.

no other income.

So that means there is nothing but zeros on lines 1 -6 of your 2019 1040,

I am active participant.

That makes you eligible for the $25K maximum deduction against other ordinary income.

The above three facts were posted by @yog-g in the original post.

Later, @qofmiwok contributed some info and specifically mentioned Schedule K partnership. That refers to a Form 1065 K-1. Hence, that adds to the confusion. The original poster, @Yogi has made absolutely no mention of a partnership or any other business structure, or any mention of a K-1. 

Finally, on top of all this, the post marked as "best answer" doesn't actually answer the question originally asked. (unless it's hidden somewhere deep in the link provided in that post, maybe.)