They should automatically carry over, if they were not used and did not carry over, you can enter them manually:
To enter Passive Activity Loss Carryovers from a Prior Year for your Rental Property in TurboTax Premier:
I know I can input them manually with some research of prior years to see if there are any. My issue is TurboTax does not pick them up from my prior year returns like it does with other numbers.
Under normal conditions the passive loss carryover would carry forward ass all of the other information does. Please confirm that you did not sell a property or some thing that would have depleted the Passive Loss Carryforward.
I have sold the property. How do I carry those losses forward to this year. Can part of these losses be used next year?
Can you please clarify, what kind of business property did you sell? The carryover rules are different for different type of assets.
Loss on sell of personal property isn't deductible.
We sold rental property A in 2018 and did a 1031 exchange to purchase property B. They Both had losses in 2018 that was carried over on form 8582 as unallowed loss on worksheet 5. In 2019 we still had lost income so the Unallowed Losses were indicated on form 8582 on BOTH properties as unallowed loss on worksheet 1 and 4. In 2019 we sold Property B and did another 1031 exchange. Again both properties had losses. We do not have positive income to absorb these losses so they need to be carried over again. I am unsure where to put both Property A and Property B loss that needs to be carried over. From what I read we have to keep carrying over the loss until we have positive income.
it depends. If you used Turbo Tax in 2018 and 2019, the losses should have carried forwarded automatically and a new 8582 generated. if not, then follow these steps for each property.
I've been using Turbo Tax for many, many years. The loss carryover issue seems like it might be related to the fact that I have one property with a loss and another with a gain. So the net is a gain and the loss on one is not carried over.
Exactly!! A net gain is not allowed for the one property. The computation is for the net gain or loss.
The IRS classifies renting out property as a passive activity unless you're a full-time real-estate professional. You can't deduct passive losses from non-passive income, only from other passive income. If you have a couple of rentals and one of them is in the red, for instance, you can write off the loss from one house against the gain from the other. If the grand total of all your passive activity is a loss, you have to carry it forward.
Use this link for more information:
At first I thought my situation is the same as @MrVette but not really.
My situation : I sold rental property A and bought a replacement rental property B (via 1031 exchange) in 2019 with a PAL carryover. I did a carryover loss in last year tax filing (2019 1040) and it shows BOTH properties there with losses.
To illustrate this, property A (old) had $10k loss, and property B (new) had $500 loss for 2019, for a total of $10500.
This year when I am entering rental property, of course I no longer own property A. Where do I put the $10k from last year? Turbotax only carries over the $500 from the new property last year.
How can I trigger TurboTax to carry over the 10k loss as well, basically the grand total from 2019 form 8582 total unallowed loss?
Basically, all of your carry over losses are "released" in the tax year you sell the rental property.
First, losses are deducted from any gain realized on the sale.
Next, if the losses get your taxable gain on the sale to $0 and there's a loss amount left over, the remaining amount is deducted from other ordinary income in the same tax year of the sale.
Then if that gets your taxable ordinary other income to zero and there's still some loss left over, it gets carried forward to the next tax year.
@Carl - Yes, got those. It's still carried over, meaning I still have loss.
BTW, this is a 1031 exchange, so last year TurboTax understands this and summed the 2 losses up as 2 line items: $10k from old property, and $500 from new property.
What I am not sure about is: what should I do *this* year for the old property. Obviously I no longer own that property, so I should really delete that from rental income. However, I see that the carryover losses are still attached to each property A and B. Turbotax does not seem to "know" to combine this after last year 1031 exchange filing.
What should I do?
a. Leave the old property A alone - but enter $0 for all income, expenses, etc. just so I have the carryover loss listed
b. Delete the old property A - but I will only have $500 carryover from the new property last year, when it really should be $10500.
If I do (b), I saw the above you can enter the actual total carryover loss manually, but is this the correct thing to do?? Is there not a way for Turbotax to do this automatically so I know it is legit?
Thanks!
What I am not sure about is: what should I do *this* year for the old property. Obviously I no longer own that property, so I should really delete that from rental income. However, I see that the carryover losses are still attached to each property A and B. Turbotax does not seem to "know" to combine this after last year 1031 exchange filing.
I have zero experience with 1031 exchanges, and any guesses on my part would most likely be wrong.
However, if you flat out sold a property and did not exchange it, then if you correctly and (most importantly) completely reported the sale in the SCH E section of the program, it should not have been imported from the 2019 tax return. If it was imported, then it very well could be fine to just delete it. But before you do that work through each individual asset and confirm beyond any doubt that you show each individual asset as sold.
If you claimed any vehicle use at any time you owned the property, then you need to work through the vehicle expenses section and show the disposition of that vehicle. Now I seriously doubt you sold a vehicle as part of the rental property sale. So you may just need to work through that section and show the vehicle as removed for personal use.
If everything checks out, then deleting that property from the SCH E section of the program would be the way to go.
@Carl - Sorry, no, this was not a flat out sold property. It was exchanged, which is why it's complicated.
The question I had was very specific to 1031 exchanged property when the old carryover passive activity loss came from old property to the new property. I was surprised to see TurboTax didn't combine it and I want to know how to get those combined.
What you were explaining is a very different case, and does not involve 1031 exchange transfer of loss and/or gain.
You can combine the properties into one OR continue depreciating the relinquished property and the replacement property also. You probably kept two schedules and so have two carryovers.
@M-MTax - How can I combine them into one automatically? I mean I can punch in the total number in the screen after "Do any of these apply..." as others have mentioned above, but I would think TT must be smarter than this and it should know that I did 1031 in last year's return?
Right now basically I have 2 properties in Sch. E in 2 separate column, but the older/relinquished property has $0 income, etc. so it's pretty much a blank column. And I also have 2 rows in 8582 PAL limitation worksheets where the old/relinquished property is listed as carrying that $10k amount.
Is there a benefit in keeping them separate?
Thanks in advance!
@mw29 The only benefit would be if there was an election to treat the properties separate for the purposes of depreciation. Otherwise, it makes no difference that there are two 8582 worksheets......your suspended PALs will be released when you eventually sell the property in a taxable transaction.
Hmm.. OK. I think we are talking about different things now? Is suspended PALs basically the PAL carried over from the old/relinquished property to the new one? The word "suspended" is always confusing to me because the losses were not actually suspended right? It actually goes into the new property and continues to be treated as PAL?
There's actually only 1 8582 worksheet, but there were 2 lines last year. I want to eliminate this and make them a single line. Same thing with Sch. E. I want to eliminate the blank column (the relinquished property).
The PAL carryover practically now *should* belong to the new property we acquired in that 1031 exchange because that's the whole idea of the exchange, right, ie. the gain and loss are carried from old to new property.
Yes the PAL goes into the new property but is suspended until you have passive income for which the PAL can be used to offset.
You can combine lines except for the depreciation of the relinquished property and replacement property unless you rolled that into one asset.....the replacement property.
How would I enter passive losses on a rental property from years prior to 2019? I've had this property since 2002 but have not used Turbo Tax continuously through the years. Can I go through my previous tax returns, gather previous passive losses and report it against my 2020 sale?
@mw29 - Thank you SO MUCH for posing this question last year. I am in exactly the same situation a year behind you. I did a 1031 exchange in 2020; now for 2021, I had no income for the original (exchanged) property), but I have carryover loss from that exchanged property that has not yet been fully applied to gains. What did you end up doing? I am seeing the same thing on Schedule E that you described: the column for the original (exchanged) property is blank except for line 22 which is reporting a carryover loss (no income and no expenses in the column). Did you (a) leave Schedule E "as is" reporting an essentially blank column for the exchanged property except for the carryover loss, or (b) did you eliminate the column for the exchanged property and manually input a new carryover loss amount into the replacement property that is increased by the amount of remaining carryover loss from the exchanged property? Many thanks!
@m25 It's been a while and I don't have TT in front of me now, but IIRC I ended up with b) eliminate the column for the old (exchanged) property and manually (YES!) added the loss to the new (replacement) property.
Actually you got me really curious and I checked, and yup that's what I did.
IRS hasn't called or mailed me (except for the fake IRS with foreign accent leaving me vmail lol), so I guess I am OK...
@mw29 Thank you for the reply! I followed your lead and checked the forms before filing - all looks good! Intuitively, it makes sense to eliminate the exchanged property and add the passive loss to the replacement property, but it was comforting to have the additional support any time I start making manual changes. Thanks again!
I also found this thread which recommends the same action:
I have passive loss carryover for rental property. I see the TT page showing the loss in 2018, but realize was not applied in 2019 or 2020. I have checked the box "I have passive activity real estate losses..." Now looking at sched E for 2021; isn't showing up there again.