Passive loss carryover not applied to rental income

[pradeepbysani]

I had passive loss carryover for my rental property from previous years for property1 which continues to make losses. Last year, I have another property2 that made profits. Bcoz I had passive loss carryover from previous years, I expected that my rental income will become zero. I filed last year with Turbotax and it automatically picked showed my passive loss under property1. However, Turbotax online surprised me showing the profits from rental without offsetting it with carryover. This has increased the tax income due.

I finished all entries and did final review hoping turbotax will correct, but it didnt. How could I rectify this?

[KrisD15]

To clarify, in the rental interview, do you select YES to being an Active Participant? 

[pradeepbysani]

Thanks for your reply. I remember selecting it. But when i check it again, I dont see it anywhere. Where do i verify if I selected active participant?

[pradeepbysani]

I was able to verify and confirm that I selected YES to Active Participant for both properties.

[KrisD15]

Please return to the rental section and select YES to "Do you want to review your rental and royalty information?".

On the second "Rental and Royalty Summary" screen, select edit for the rental.

Select UPDATE for the "Property Profile"

Continue through the interview to the entry screen for "Let's Find Out if You're an Active Participant in This Property"

[pradeepbysani]

Thanks, I checked it and it was already recorded as Active Participant. Let me know what next step I should take?

[KrisD15]

Did you also verify that the passive loss is listed?

Did you indicate that you have passive loss carryover?

Are the amounts entered as negative numbers?

Are you sure you are 100% owner and that you DID NOT select "not at risk" ?

[pradeepbysani]

Thanks again. I verified that. Here are my answers.

Did you also verify that the passive loss is listed? Yes

Did you indicate that you have passive loss carryover? Yes
Are the amounts entered as negative numbers? The system automatically picked them up from last year return. They are shown as positive number. I tried editing it to make it negative number but it doesnt take negative number. The UI seems to have changed from your screenshot. It doesnt display the message that the value should be negative!!

Are you sure you are 100% owner and that you DID NOT select "not at risk" ? Yes, I select None in that screen

[AmeliesUncle]

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@pradeepbysani wrote:

I have another property2 that made profits.

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Any chance you classified the profitable rental as a "self-rental" or as "land" or some special circumstance that it is a non-passive activity?

[pradeepbysani]

Thanks for checking in. Thats not the case either.

But here is what could have mattered. I first selected QBI for both of my properties. Later, I realized that passive loss carryover for non QBI is different from passive loss carryover for QBI. I realized that I would be benefitted by not claiming QBI and removed it. I am suspecting that Turbotax Software is failing to handle this change from one to other. It recomputed my rental income without QBI deduction but is not applying Passive loss carryover after that.

[SusanY1]

I would like to take a deeper look at this. However, I need a diagnostic file which is a copy of your tax return that has all of your personal information removed. You can send one to us by following the directions below:

TurboTax Online:

1. Sign into your online account.
2. Locate the Tax Tools on the left-hand side of the screen.
3. A drop-down will appear. Select Tools
4. On the pop-up screen, click on “Share my file with agent.”
5. This will generate a message that a diagnostic file gets sanitized and transmitted to us.
6. Please provide the Token Number that was generated in the response.

TurboTax Desktop/Download Versions:

1. Open your return.
2. Click the Online tab in the black bar across the top of TurboTax and select “Send Tax File to Agent” *
3. This will generate a message that a diagnostic copy will be created.  Click on OK and the tax file will be sanitized and transmitted to us.
4. Please provide the Token Number (including the dash) that was generated in the response.

*(If using a MAC, go to the menu at the top of the screen, select Help, then, “Send Tax File to Agent”)