Rental Property Depreciation Deduction

Any losses from the business portion of your rental activity, which by their nature are passive activity losses (PALs), include any depreciation combined with other expenses that are not allowed due to the income limitations.

When your tax return is complete you will see the unallowed losses, that will be carried forward on Form 8582, Worksheet 6.

Phaseout Rule: The maximum special allowance of $25,000 ($12,500 for married individuals filing separate returns and living apart at all times during the year) is reduced by 50% of the amount of your modified adjusted gross income that’s more than $100,000 ($50,000 if you’re married filing separately). If your modified adjusted gross income is $150,000 or more ($75,000 or more if you’re married filing separately), you generally can’t use the special allowance. This is because the special allowance is reduced to $0 since the modified adjusted gross income is over the $100,000 amount.

• Sign into your TurboTax return > Search (upper right) > Type rentals > Press enter > Click on the Jump to... link >
• Edit next to the Rental Activity  > Edit next to the Property Profile or General Info > Continue to the question about active participation to be sure you have selected this > Continue to the end of the section for TurboTax to save your changes.

Any losses that reflect the business portion of unallowed losses will be allowed in full in the year of sale.  I'm not trying to be cryptic, but you indicated it's a vacation rental so it's not clear if this property is used 100% for business purposes. TurboTax will be using the business percentage based on your entry of the property.

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@AFRental wrote:

 Sch E Worksheet is still showing about $22K in Current Yr Depreciation & Depreciation Carryover under Vacation Home Loss Limitation;

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Was this rental also used for personal purposes?  Did you enter any personal-use days?  Please give details.