Passive 8582 carry over from 2011

[wlaurenc5555]

On my 2011 Form 8582 (line 4), I have a surplus of -31.778 from old rental properties.   In 2024, I have a new rental.   Can I use the old 2011 surplus against my new 2024 rental?   If so, do I just enter it in 2024 Form 8582.

[marctu]

Unused passive activity losses ("PAL") are carried forward to future tax returns (they don't expire). There are two common ways passive activity losses are used up: (1) Upon the sale of the property or (2) being used up by passive income generators.

My concern with your scenario is the use of the phrase "old rental properties".  With the passage time, did you use this PAL in a prior year either when the old rental properties were sold or they operated at a profit in a given tax year between 2012 and 2023?  If they were not sold and operated at a loss, the PAL would have increased during the same time period.  I would look at all the tax returns between 2012 and 2023 for From 8582 as well.  

If you were supposed to use the PAL in a prior tax period, and did not, depending upon the tax year you can amend the tax return (2021, 2022 and 2023) to correct the carryover.  

Thank you for your question @wlaurenc5555 

All the best,

Marc T.

TurboTax Live Tax Expert

27 Years of Experience Helping Clients

[wlaurenc5555]

In 2012, I stopped renting the condo.    From 2012 to 2022, I used it as a vacation property only (like a 2nd home).   Then in 2023, I sold the property at a loss.   From the material I read, I could not claim any losses on a vacation home sale.   

I purchased TurboTax protection and my 2023 tax returns have been uploaded to TurboTax if you want to take a look.

Under this scenerio:

- Should I have increased the PAL when I sold the vacation property in 2023?

- Can I use the use the PAL in 2024 then?

[marctu]

Thank you for that clarification, and the additional facts supplied regarding the use of the property between 2012 and 2023.  You are correct, when you sold the vacation home in 2023 you were unable to use the the PAL from the time it was a rental (2011 and prior).   The PAL should be unchanged if this was there were no other PAL between 2012 and 2023 as well.

To the extent you have passive income in 2024 or a future year you can deduct the suspended PAL from 2011.  If you have no other passive income, the PAL will remain suspended until the time you have passive income.

All the best,

Marc T.

TurboTax Live Tax Expert

27 Years of Experience Helping Clients

[wlaurenc5555]

Will the 2024 rental income be considered Qualified Business Income?   It is for profit.   I am using a management company but personally approve all repairs, pay insurance, etc...

[RobertB4444]

Your rental property income is generally considered passive income.  In order to be eligible for the QBI deduction it needs to be an active business.  If you are a real-estate professional then you already qualify.  

If not then only you can decide if it is an active business and qualifies for the deduction.  In order to qualify it must meet all of the following requirements-

• Must keep it's own books to track income and expenses just like any business.
• Must have at least 250 hours a year of rental services.
• Must have ongoing records of all the rental services performed.

Here is an excellent TurboTax article on this very question.  Take a look at it for more details.

@wlaurenc5555 

[wlaurenc5555]

How do I enter the 2011 passive 8582 into 2024 TurboTax Home and Business?   I am unable to override (Cntl-D) or just enter anything on Form 8582 p1: Part I 1c (Prior years' unallowed losses) or new activity to Part IV Prior years line c Unallowed loss.

[RobertB4444]

Since it is a new activity it can't have prior year unallowed losses.  You'll need to recreate the old rental activity and add the unallowed losses through it.

First, create the rental.  Use the same information as last time but don't enter any assets to depreciate or any income or expenses.

When you get to the screen that asks "Do any of these situations apply to this property" click the box next to 'Carryovers' and 'I have passive activity real estate losses carried over from a prior year'.  On the next screen enter the losses as a negative number.

You can say that this activity ended in 2024 so that the losses can be added to the new activity and carried forward in the system.

@wlaurenc5555