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NOL Net Operating Loss for Rental Properties

burgerguy14 — Tue, 24 Feb 2026 07:19:14 GMT

NOL Net Operating Loss for Rental Properties

I own 2 rental properties which generated losses in years 1,2 and 4 of existence.

Year 1 was 2017 which I filed an incorrect tax return on. I am getting reading to submit a corrected return for 2017.

I have not filed taxes from 2018 thru 2022 because I knew I would not have any taxable income. I am preparing 2018 – 2022 returns now.

I believe I am entitled to NOLs after reading IRS publication 536 on Net Operating Losses for Individuals.

Can I carry any of the NOL’s back to 2016 (I was a w-2 employee back then)? Or should I just carry the NOLs forward at this point?

Re: NOL Net Operating Loss for Rental Properties

Anonymous_ — Sun, 24 Sep 2023 17:30:29 GMT

@burgerguy14 wrote:
I believe I am entitled to NOLs after reading IRS publication 536 on Net Operating Losses for Individuals.

Publication 536 does mention real estate losses but without any specificity.

Based upon a post you made in another thread, you do not provide "substantial services to your tenants", which would essentially permit filing on Schedule C which, in turn, could create an NOL.

Further, it does not appear as if you are a real estate dealer (e.g., your business is buying and selling real estate), which would, also, permit filing on Schedule C which, in turn, could create an NOL.

Beyond the aforementioned, you would have to qualify as a real estate professional who materially participates in your rental activities in order for the losses to be considered nonpassive.

See https://www.irs.gov/publications/p527#en_US_2022_publink1000234059

Note that whenever you read something on the order of "rental qualifies as a trade or business" around here, they could very well be referring to being treated as a trade or business for the purposes of the QBI deduction.

I am going to page @AmeliesUncle and @Mike9241 for further input.

Re: NOL Net Operating Loss for Rental Properties

Mike9241 — Sun, 24 Sep 2023 17:44:14 GMT

@burgerguy14 seek professional help. in case where the losses would be passive, if your AGI was low enough, an amount up to $25,000, would be available to offset other income. your problem is by not filing timely returns or amended returns for certain years those losses may be permanently lost.

Re: NOL Net Operating Loss for Rental Properties

Anonymous_ — Sun, 24 Sep 2023 20:17:18 GMT

I agree with @Mike9241; it's more likely you would have a loss eligible for the SDA (up to $25,000) which you could use to offset other income.

However, since you mentioned little (or no) income, you might not be able to take advantage of the SDA. As a result, the loss would be carried forward as a passive loss.

Eventually, you may have passive income which could be offset by the accumulated passive losses or you could use the suspended passive losses to offset gain when you sell the property (the sale could actually result in an NOL).

Re: NOL Net Operating Loss for Rental Properties

burgerguy14 — Wed, 27 Sep 2023 20:16:18 GMT

I read thru the instructions on 2017 & 2018 Net Operating losses (IRS Pub 536). It looks like I've missed the deadlines for both years. Based on what I've read I can only carry these losses forward. Which is unfortunate b/c I was in a much higher tax bracket for the years I would have been able to carry back.

I've contacted a CPA and I'm waiting to hear back. Maybe there are some work arounds or leniencies granted. Doubtful.

NOL Year	Carryback year	1040-x deadline to carry back
2017	2015 – p536 says only back 2 years	4/15/2021
2018	2013 – CARES Act allows 5 year carry back	4/15/2022

Re: NOL Net Operating Loss for Rental Properties

Anonymous_ — Wed, 27 Sep 2023 20:14:51 GMT

Wait until you hear from your CPA. I don't believe we're going to be able to convince you that you don't have an NOL.

Re: NOL Net Operating Loss for Rental Properties

burgerguy14 — Wed, 27 Sep 2023 20:21:45 GMT

@Anonymous_

I'm fine taking it as a passive loss. But when I work through TurboTax, I don't see a passive loss carrying over to the next year. But at the end of each TT "Walk thru", TurboTax says "it looks like you have a NOL". And to manually calculate the NOL and enter in the appropriate form.

Maybe I'm missing a step when I go through TurboTax???

Thanks.

Re: NOL Net Operating Loss for Rental Properties

Anonymous_ — Wed, 27 Sep 2023 20:25:00 GMT

@burgerguy14

You are correct, and you are not missing anything. It's simply that TurboTax tends to throw that message if your AGI is negative. That is actually the program making an attempt to alert you to the fact that you should check and see if you have an NOL (using the NOL worksheet).

Re: NOL Net Operating Loss for Rental Properties

burgerguy14 — Wed, 27 Sep 2023 20:40:20 GMT

I used the NOL worksheet, and it shows I have NOL 2017 & 2018. No NOL for 2019-2021. And a small NOL for 2022.

Re: NOL Net Operating Loss for Rental Properties

Anonymous_ — Wed, 27 Sep 2023 20:49:32 GMT

I understand, but you can't use your net rental losses as part of that equation unless you provide substantial services to your renters or you are a real estate dealer.

Re: NOL Net Operating Loss for Rental Properties

Mike9241 — Thu, 28 Sep 2023 01:31:51 GMT

while passive losses automatically carry forward the rules for NOL are different. For the years involved when the loss incurred you had to make an affirmative election on a timely filed return to carryforward the NOL. failing this the NOL could only be carried back.

Re: NOL Net Operating Loss for Rental Properties

burgerguy14 — Thu, 28 Sep 2023 10:45:44 GMT

@Mike9241 Agreed - I am in quite a pickle. I did not choose to waive my carryback in a timely manner for 2017 & 2018. B/c I did not file the waiver, I cannot waive the carryback period. And I am not eligible for the carryback period. Kind of a Catch-22.

I'm fine using passive losses and carrying them over but it doesn't seem to work for me.

Here's a Form 1040 illustration:

Interest and dividends : 11,000

Capital Gains/loss: -3000

Rental real estate: -21,500

AGI: -13500

Itemized deduction: 37,000

My Itemized deductions wipe out all of my income. 11k - 37k = -26k

The real estate losses were not needed to decrease my tax bill. There is no carryover of my real estate losses. to the next year. Maybe I'm missing something here. Like I forgot to click on a checkbox.

(The capital gains/loss doesn't actually get used and gets carried over to the next year).

Re: NOL Net Operating Loss for Rental Properties

Anonymous_ — Thu, 28 Sep 2023 13:50:28 GMT

@burgerguy14 wrote:
(The capital gains/loss doesn't actually get used and gets carried over to the next year).

Your real estate losses should also not actually get used but carried over to the next tax year (as passive losses) unless certain criteria are met.

Re: NOL Net Operating Loss for Rental Properties

burgerguy14 — Thu, 28 Sep 2023 13:54:48 GMT

@Anonymous_ Ok that's a relief. I must be doing something wrong when going through the interview questions. Or maybe I need to manually carry them over.??

Re: NOL Net Operating Loss for Rental Properties

Anonymous_ — Thu, 28 Sep 2023 13:58:52 GMT

For example, indicating you materially participated as a real estate professional or something similar during the interview process.

I'm not sure because I can't see your return but under normal circumstances, you would simply have passive loss carryovers.

Re: NOL Net Operating Loss for Rental Properties

burgerguy14 — Thu, 28 Sep 2023 14:34:37 GMT

I check off ACTIVE participant. Not material. See attached.

Re: NOL Net Operating Loss for Rental Properties

Anonymous_ — Thu, 28 Sep 2023 14:44:21 GMT

That's fine and is most likely the proper and appropriate way for your purposes.

However, where are you seeing the real estate loss (which form or schedule) and do you have Form 8582 in your tax package?

Re: NOL Net Operating Loss for Rental Properties

burgerguy14 — Thu, 28 Sep 2023 14:54:14 GMT

@Anonymous_ there are no Form 8582s in my tax package.

I see the loss on Schedule E and then on Schedule 1.

Re: NOL Net Operating Loss for Rental Properties

Anonymous_ — Thu, 28 Sep 2023 15:42:08 GMT

If you reported on Schedule E, checked Active Participation in the program, have a negative AGI (with a negative figure for your real estate activity), and no 8582, it's almost certainly a result of the special allowance (up to $25,000) for active participation.

See https://www.irs.gov/publications/p527#en_US_2022_publink1000219124

Re: NOL Net Operating Loss for Rental Properties

Anonymous_ — Thu, 28 Sep 2023 15:44:59 GMT

Also note:

Form 8582 not required.

Don’t complete Form 8582 if you meet all of the following conditions.

Your only passive activities were rental real estate activities in which you actively participated.
Your overall net loss from these activities is $25,000 or less ($12,500 or less if married filing separately and you lived apart from your spouse all year).
If married filing separately, you lived apart from your spouse all year.
You have no prior year unallowed losses from these (or any other passive) activities.
You have no current or prior year unallowed credits from passive activities.
Your MAGI is $100,000 or less ($50,000 or less if married filing separately and you lived apart from your spouse all year).
You don’t hold any interest in a rental real estate activity as a limited partner or as a beneficiary of an estate or a trust.

If you meet all of the conditions listed above, your rental real estate activities aren’t limited by the passive activity rules and you don’t have to complete Form 8582. On lines 23a through 23e of your Schedule E, enter the applicable amounts.