QBI Operating Loss

[Toksica]

I bought some Properties towards the end of last year and had to do some repairs to get rent ready; this made for an Income loss in 2019. On doing the 2020 taxes, Turbotax is now requesting me to enter QBI Passive Operating Loss for 2019 while it was doing a check of the tax information I had entered so far.

I thought this Software should be the one automatically handling this kind of things instead of asking me such a technical action. I don't know what it wants me to do. It wasn't even providing me a help option.

[ColeenD3 · Accepted solution]

In the case of one entity, the carryforward seems simple enough. However, that is not the case for some businesses. See this LINK for an explanation of why it is not always so cut and dried. In your case, just enter your Schedule E loss.

[Toksica]

Coleen, Thanks for your reply. Since we are talking about losses, I might as well ask a question that is puzzling me. I have W2 income and I also have losses of about -$67K from rental properties (bought properties in 2020 that needed rehab), I had assumed that all of the -$67K in losses will be netted against my W2 income. But I noticed that only -$16K was used this year (I saw that when I looked at the State return for the State where the properties were located). What are the rules about how much losses can be used in a tax year

[ToddL99 · Accepted solution]

The amount of rental losses that you can write off is proportionately phased out between $100,000 and $150,000.  

For example, if your adjusted gross income is $125,000, you can write off  $12,500 in rental losses in the year of the loss.  If you are an active participant and your adjusted gross income is $150,000 or more, you can write off no rental losses on your tax return in the year of the loss. 

When your adjusted gross income is $150,000 or more, you cannot write off any losses on your rental income. The amount of your loss sits in a separate account, and you can only write it off against your capital gains upon qualified sale of the rental property .(Sec. 469(g).

Under IRC § 469(g), current and carryforward passive activity losses are fully deductible in the year of an entire disposition in a fully taxable transaction to an unrelated party.

What is the limitations on rental house losses based on income, filing jointly.

[Laurelby]

So I am having the same issue on one of my rental properties with the QBI Passive Loss carried forward from 2019.  The program carried it forward into the "regular tax" loss column, but not the QBI Passive Loss.  Are these then supposed to be the same number, or how do I be sure?  When I entered the same number in the passive loss column it impacted by raising my tax (lessening the deduction) which seams odd as it was actually registering a carry forward loss.  I called support and they indicated it should be a calculated entry but is not working.  Can you confirm or provide guidance as I am very perplexed.

Thanks

[DianeW777]

If a loss is carried forward to combine the QBI for all business activities this loss would reduce the qualifying income eligible for QBI.  It would make sense that the tax would go up because the deduction would go down. The combined amount of income eligible for QBI provides the net result that it is calculated from.

• Qualified Business Income Deduction

[Laurelby]

So this does make sense, but I am still a little confused as to where the entry in the schedule E worksheet Line G for QBI Loss from 2019 comes from?  Everything imported over from last year, but upon final review its asking for a number to be input directly on the form on the schedule E worksheet passive loss "unallowed passive loss" from 2019, as this cell is empty.  The program brought forward values for the regular tax column and the AMT column, but not the QBI.  It looks like this is supposed to be an imported figure, but it is not auto-populating and the error check is requesting a manual entry.  Which location from the previous years return should I refer to in order to enter the correct figure?  It would be easy enough to enter, but I'm not certain which number from the 2019 return corresponds here.  Can you provide guidance as I'm not sure how to proceed?

[ThomasM125]

Form 8582 would report your passive losses. On line 4 of that form you will see your passive losses available for the current year and on line 16 you will see the losses deducted in the current year. The difference between those numbers would be the carryover loss to the next year.

[Carl]

While it's true that form 8582 will show your passive loss carry overs, it will not show anything concerning QBI. For that, look at last year's (2019 taxes) form 8995. Line 16 will show you your total QBI carry over loss that gets carried over to the 2020 taxes.

[Dave2360]

Did you ever get a reasonable answer to this?  I am having the same issue for two different rental properties.  It appears TT should just calculate it but doesn't and there is not any help for it.

[Toksica]

Yes I did. You should go back and read the the first 3 replies to my question and I think one of them answered it

[Toksica]

Below was the first reply I got and that was what I did.

Reply from Turbotax==========

In the case of one entity, the carryforward seems simple enough. However, that is not the case for some businesses. See this LINK for an explanation of why it is not always so cut and dried. In your case, just enter your Schedule E loss.

[halstax1]

token number 742778

[BillM223]

@halstax1

Could you tell me why you submitted this file? I see that there is an entry on the Schedule E worksheet for 2019 Operating loss as an override. Was this a zero before? 

Please tell me what you are trying to do so we can look at it.

[Laurelby]

When I completed the return and went to review, a missing entry error generated for this entry.  The cell was blank on the worksheet.  I’m trying to understand where this number should be coming from.  I’ve called several times to support and am still unclear how to proceed.  I would think this entry would have been calculated from the imported data from the 2019 return, but apparently it is not and the directions are very unclear.  My question really is, should this have been calculated and if so how do I get that to occur or perhaps Oler move the over ride, and if it is not calculated, where does the number come from in the 2019 return?

Thank you!