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rental property lose

in Turbo Tax my rental property lost is $18,820 but in the next line, what you can deduct at this point came up as $182,512 and I don't know why this amount. And the limited loss did not kick in. Is this an error in Turbo Tax?
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Accepted Solutions

rental property lose


@Carl wrote:

If you don't have $182,512 of taxable income to deduct those losses from, then once those losses get your taxable income to zero, the remainder will be carried over.


The remainder will create an NOL (net operating loss), which can be carried back or forward.

 

 


@Carl wrote:

There's also the possibility that the losses you can actually claim could be capped at $3K per year until it's all used up. It just depends on things like your filing status and AGI.


This particular loss would not be capped since it is not a capital loss. It is a loss from the sale of business property (Form 4797). Again, it has the potential to create an NOL.

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4 Replies
Carl
Level 15

rental property lose

It would appear you've been a landlord for quite a number of years, and/or have more than one rental property you own. It is not common for long term residential rental real estate to show a profit. In fact, it's more common to show a loss each and every year.

When you add up the deductible expenses of mortgage interest, property taxes, property insurance and the depreciation you're required to take, those four items alone are usually enough to exceed the total rental income received for the tax year. Add to that the other deductible rental expenses such as repairs and maintenance, and you're practically guaranteed to show a loss.

In general, once your passive rental losses gets your passive rental income to zero, that's it. Any remaining losses are just carried over to the next year. So the amount of carry over losses will continue to grow with each passing year. You can't realize those losses until the tax year you sell the property.

Now if you meet the income thresholds, you are allowed to deduct a maximum of $25K of those excess rental losses from your other ordinary income. But if your AGI is to high, that won't be allowed. If you don't have enough taxable income to claim the $25K excess lost against, then any difference will also be carried forward.

Based on the limited information provided thus far, I see nothing wrong here at all.

rental property lost is $18,820 but in the next line,

Without knowing what line numbers on the SCH E (or whatever form/worksheet) you're referring to, it's not possible to base my above response on known facts as they pertain to your specific and explicit situation.

 

rental property lose

Thanks, let me see if I understand you correctly. Because I own this property for 14 years and I sold it in Nov. 2021. The losses that I took in those years on my Sch E is the total amount taht Turbo Tax is saying I can

deduct at this point, which is $182,512. This also include the lost from the purchase and the sale price.

Carl
Level 15

rental property lose

The losses that I took in those years on my Sch E is the total amount taht Turbo Tax is saying I can

deduct at this point, which is $182,512.

You are correct. But TurboTax isn't saying that (per-se). The IRS says that all suspended  losses are fully deductible in the tax year you sell. Of course, you have to actually have the income (from all sources) to deduct it from.

If you don't have $182,512 of taxable income to deduct those losses from, then once those losses get your taxable income to zero, the remainder will be carried over.

There's also the possibility that the losses you can actually claim could be capped at $3K per year until it's all used up. It just depends on things like your filing status and AGI.

But now that I know you sold the property in 2021, it appears things are working with the program exactly as they should.

 

rental property lose


@Carl wrote:

If you don't have $182,512 of taxable income to deduct those losses from, then once those losses get your taxable income to zero, the remainder will be carried over.


The remainder will create an NOL (net operating loss), which can be carried back or forward.

 

 


@Carl wrote:

There's also the possibility that the losses you can actually claim could be capped at $3K per year until it's all used up. It just depends on things like your filing status and AGI.


This particular loss would not be capped since it is not a capital loss. It is a loss from the sale of business property (Form 4797). Again, it has the potential to create an NOL.

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