Passive Activity Loss Carryovers

[H4T3m4t2]

First, is Passive Activity Losses synonymous with depreciation/ depreciation expenses? 

We have one rental that we turned into an LLC a couple of years ago, single owner, out of state.  On the section where you can enter in Passive Activity Loss Carryover from prior years, it states to enter it from Schedule E.  From last year's Schedule E, on line 21 to be exact, there is a negative number, but on line 22 (Deductible rental real estate loss after limitation, if any, on Form 8582), there is a zero.  However, on Form 8582, I have a different negative number on line 4, the unallowed losses.

What can I enter for the carryover?  I haven't been entering anything on this entry since it became a rental.

[GeorgeM777]

No, passive losses are not the same thing as depreciation.  Depreciation is referred to as an expense, but it is the method by which a business owner can recover its cost in an asset used in a trade or business.   Depreciation and other expenses associated with, for example, a rental property when added together and then subtracted from the rental income may result in a loss.  Losses from rental activities are generally passive losses but there are exceptions.  For example, if you materially participate in the rental activity, then the losses may not be considered passive.  Additionally, if you meet the definition of real estate professional, rental losses would not be considered passive losses.

Because you asked about the prior year carryover passive losses, the 2020 Form 8582, line 1(c) is where you will find the prior years' unallowed losses. Line 4 combines various other amounts, such as other passive activities, and includes the amount from line 1(c).  

To enter your carryover loss, from Income & Expenses (TurboTax online), enter Schedule e in the search bar.  Select the jump-to link and begin to enter your rental property information.   As you continue through that part of TurboTax, you will see a page where you can enter your carryover losses.  

@H4T3m4t2

[H4T3m4t2]

Thank you for your reply.  To confirm, if Form 8582, line 1c is blank, then I have no losses?  I have an amount under line 3b and 3c and these amounts are carried over into a negative number on line 4.  But on the very bottom of the form on line 16, Total losses allowed, it has a 0.

[GeorgeM777 · Accepted solution]

Yes, because your 2020 Form 8582 line 1c is blank, you have no carryover losses associated with rental real estate with active participation. Because you have losses on lines 3b and 3c means that you have losses from other passive activities (not real estate activities).   In fact, the amount on line 3c is a carryover of un-allowed losses from the prior year.  

@H4T3m4t2