Rental loss as a deduction against non-passive income

[ET_boston]

Primary residence was converted to rental mid year. MAGI is over 160K.

Why does TurboTax deduct rental loss from W-2 income?

[AmyC]

Your question asks about non-passive income. Non-passive income is income worked like a business and is deducted against wages. Normally, a rental house is passive income and limited by the passive activity rules.

Please review your answers, if this was actually a passive rental.

[ET_boston]

Rental is always a passive income. For people with MAGI < 150K , 25K of rental (if rental with active participation) can be deducted against ordinary income. However, TurboTax deduct it for a tax payer with MAGI over 160K. I am looking for a way to fix this

[PatriciaV]

Please review your answers to the introductory questions under the Rental Property section to be sure you did not indicate that you qualify as a real estate professional. These questions result in non-passive treatment of rental income/loss.

Also check Form 8582 Part II to see if your MAGI is limiting your real estate losses.

[AmeliesUncle]

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@ET_boston wrote:

Primary residence was converted to rental mid year.

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Did you enter any personal days?

You only enter personal days AFTER it was converted to a rental.  In most cases, that will be ZERO personal days.

EDIT:  As a side note, you'll need to ONLY enter expenses for the rental period, which means manually prorating the annual expenses, such as real estate tax, insurance, etc.  @ET_boston