Passive Activity Loss carryover

[MrVette]

It seems to me that TurboTax does not go back to past year returns and grab any PLA carryovers. Am I correct? If so why doesn't it do so? It picks up other numbers from prior years.

[KarenM90]

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: 

1. Click the Federal Taxes tab
2. Click Income & Expenses
3. Scroll down to the Rental Properties and Royalties section
4. Click the blue Show More in this section
5. Click Start (or Revisit) next to Rental Properties and Royalties (Sch E)
6. Click Yes
7. Click Continue
8. Click the blue Edit button next to the rental you'd like to add info for
9. Click Continue until you reach the screen entitled Do any of these situations apply to this property?
10. Scroll to the bottom of this page and check the box next to I have passive activity real estate losses carried over from a prior year. 
11. Click Continue
12. You'll be able to input the carryover amounts on the next screen

[MrVette]

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.

[JohnB5677]

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.

[mchaska]

I have sold the property.  How do I carry those losses forward to this year.  Can part of these losses be used next year?

[npierson7]

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.

[twilliadesigns]

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. 

[DaveF1006]

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.

1. open or log into Turbo Tax
2. Go to federal>income and expenses> rental properties and Royalties> rental properties and Royalties(Sch E)>start or revisit
3. Scroll through the Screens until to get to Rental and Royalty summary Screen
4. Here you should see a listing of both properties. Edit or update the first property
5. Continue through the screen until you reach a page that says  Do any of these situations Apply to this property?
6. here you will scroll to carryovers and select I have passive activity real estate losses carried over from a previous year
7. Here you will enter the passive losses carried over from 2019
8. Now repeat steps 2 & 3 listed above and enter information for the second rental property.
9. Here is what the screen will look like in your program

[MrVette]

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.

[Cynthiad66]

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:

Passive Loss Activity

[mw29]

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?

[Carl]

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.

[mw29]

@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!

[Carl]

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.

[mw29]

@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.