NOL Net operating loss 2022 Carryover to 2023

[burgerguy14]

I am making some year end decisions today. 

I have a NOL of $2500 from 2022 from a rental.  I have net rental income of $1750 for 2023.  

Am I limited to using $1750 of the NOL against my rental income of $1750 netting me to zero?  Or can I use the entire $2500 NOL netting me to -$750 in rental income for 2023?

Thanks

[Anonymous_]

Please clarify that you actually have an NOL "from a rental".

Real estate rentals do not typically generate NOLs as net losses are considered passive losses under normal circumstances.

[Mike9241]

we don't know if you really had an NOL for 2022. Just because you had a rental loss does not mean you have an NOL. Other items of income and loss in your return must be taken into account.  Was AGI for 2022 negative? If not an NOL is unlikely. You can use the worksheet in PUB 536 to check. For example, if you had only $2000 in wages or other types of income and the $1750 rental loss there likely would be no NOL

https://www.irs.gov/forms-pubs/about-publication-536

You might have a Passive Loss carryover but if you used Turbotax or other software that would likely be computed ab automatically carried over when you did 2023. This would show up on form 8582 for 2022 Part VII column c

[burgerguy14]

As per IRS Pub 536:

• If your deductions for the year are more than your income for the year, you may have a net operating loss (NOL). 

• To have an NOL, your loss must generally be caused by deductions from your: 

  • Rental property. 

I don't qualify for Passive activity losses (PAL) as per the instructions for Form 8582 (See attached )

• Rental activities with active participation were my only passive activities
• I have no prior year unallowed losses
• My total loss wasn't more than 25K
• My MAGI was not more than 100K.

[burgerguy14]

I used Publication 536, worksheet 1 to compute the NOL of $2500 for 2022.

[Anonymous_]

There is a thread you started on this same topic:

https://ttlc.intuit.com/community/taxes/discussion/nol-net-operating-loss-for-rental-properties/00/3...

[burgerguy14]

Right I recall this thread.   @AmeliesUncle believed I had a NOL, but prior year NOLs were lost b/c I had not filed the paperwork in time.    See below.

Now I am talking about a NOL generated in 2022.  And specifically do I deduct the entire 2022 NOL ($2500) or just up to the amount of rental income I generated ($1750).    In the latter case, the remaining NOL ($750) would be carried forward.

AmeliesUncle

Level 14

I agree with Tagteam.  In my opinion, it is a NOL.  That means the loss is NOT carried forward on 8582 and that you are too late to carry back the NOL.

‎September 28, 2023 12:16 PM

[Anonymous_ · Accepted solution]

If you elected not to carryback the NOL, then it would be carried forward in its entirety.

[burgerguy14]

Thanks @Anonymous_.    I reread part of Pub 536 and you are correct there is no carryover NOL to 2024 b/c the NOL does not exceed my 2023 Taxable income.

Side note on Carrybacks: as per Pub 536:

NOL carryback eliminated. Generally, you can only carry NOLs arising in tax years ending after 2020 to a later year. An exception applies to certain farming losses, which may be carried back 2 years. 

[burgerguy14]

I am filing my 2023 tax returns and Turbotax wants and explanation statement for my NOL carryforward. 

(I am not required to file by the deadline b/c I have no taxable income.)  I have written an explanation and wanted to know if this is adequate for the IRS.

First some background information:

I am a retired landlord and own one rental property. I also own my own home.  In 2022 I had a rental loss of 2500.

• My income from interest and dividends was 10000

• My itemized deductions were 25000.

B/c my deductions were greater than my income, my rental loss is a NOL as per IRS Pub 536.

In 2023 I converted some of my traditional IRA to a Roth IRA. So my 2023 total income is greater than my deductions. So now I'd like to use my NOL from 2022. I used Schedule 1 to report my NOL of 2500 on line 8a.

The IRS wants an explanation statement. Is this explanation adequate:

Net operating loss carryover from 2022. My rental property ran a loss of -2500 in 2022. 2022 non-business itemized deductions were 25000. (as per IRS Pub. 536). 2022 non-business income was 10000. (as per IRS Pub. 536). Because my 2022 deductions were greater than my 2022 income, my rental losses were not used in 2022. This disallowed loss is treated as a NOL and carried over to later years. IRS Pub. 536, says that to carryforward a NOL to a tax year after the NOL year, list the NOL deduction as a negative figure on the "Other income" line of Schedule 1.