Does turbo tax automatically carry forward rent income loss from this year to the next? I will be earning higher rent next year and hope to use that to deduct excess loss

[AmeliesUncle]

Have you confirmed that the passive losses were unallowed?  If they were allowed, the loss shows up on Line 22 of Schedule E.  If they were not allowed, your tax return would have Form 8582 that shows the losses.

Is there any personal use of that rental property?  If so, they might not be Passive Losses, they may be Vacation Home Carryovers, which are different.

[stewy]

Ooops, sorry for my alarm. I had not confirmed that. Thanks, I think I'm understanding now.

The losses appear to be "allowed". They are getting subtracted each year from the other properties gains, so of course they aren't carried forward. I looked into this further and it's likely because some years ago I must have elected somehow to combine the properties and/or that I actively participate.

I'll assume this is right unless you tell me otherwise but until then: Thanks for setting me straight!

[dong_jason]

I have a situation where I have a large suspended passive loss.  Last year the property was sold.  As the suspended loss is activated, it will bring my income so low that I will be in the lowest tax bracket.  In this case, I would be better off keeping the loss suspended for future years where it can be used to offset income at higher tax bracket.  

Is there an option to NOT deduct the suspended loss when property is disposed?  If so, how can I do that?

[Critter-3]

 You CANNOT skip taking the unallowed losses that are released in the year of sale no matter what it does to the bottom line of the form 1040. 

[dong_jason]

Thanks for answering it so quickly. 

That is the tax law, not just a limitation of TurboTax, right?  I would really appreciate if you can point out any reference to the original law for that.

[Mike9241]

see IRC code section 469(g)

[dong_jason]

Thanks a lot.  I also found this IRS document that gives a very detailed explaination.
Passive Activity Loss Audit Technique Guide (irs.gov)

[carseat1]

It is always helpful to have an expert display the TurboTax steps.  Thank you for that.  

However, I just sold my rental in California, what happened to the losses for prior years?  I've used TurboTax software since 2002 and the accumulated suspended losses used to display in CA form 3801 until the 2020 tax year.  In 2020, the CA form 3801 the line item is gone: ("Part I 2020 Passive Activity Loss, 1c Prior year unallowed losses from Worksheet 1, column (c).")  Where does Worksheet 1 get the information?  Why did the losses not carryforward?  I've used TurboTax Premier.

Thank you.