Hello, I am confused about how TurboTax behaved when I entered my sale of rental property details. Here is my situation.
1. I bought the home in June 2008 and lived there until December 2014. That home was my primary residence during those years.
2. I moved to a different state due to a job change. Bought a new home in March 2016 in the new state.
3. I started renting my old home in the old state in Jan 2015. Every year my tax preparer computed the rental income that ended in losses. So I had losses for 2015, 2016, 2017, 2018, 2019 and 2020
4. Due to my higher income in the new state, I could not deduct the rental losses on my tax return for the corresponding year. Hence I carried forward all the losses until 2020.
5. In 2020, we had the rental until March 2020, and then the home was vacant until we sold the rental property. We sold the home in July 2020. I sold the rental home for an amount that equated to the cost basis plus all expenses. Technically not so much profit.
6. When I entered these details under the Rental and Royalties section, the TurboTax reduces my ordinary income adding all those losses from the previous years and displays them on line 8 of 1040 with a negative value. Due to the negative value shown on line 8, the TurboTax reduces my AGI and the taxable income.
Is this a correct behavior? I thought the rental loss would not reduce the ordinary income. Please advice. Thanks!
