Passive Activity Loss Carry forward

[kysf]

This is my first year using Turbo Tax.  Last year my accountant carried forward a passive activity loss  for property that I had stopped renting in 2020.  I am not a real estate professional.  Since I'm no longer renting the property, there is no need for Turbo Tax Business but I do not have a K-1 or other document other than last year's 1040.  How do I enter the PAL into Turbo Tax?

[Mike9241]

what happened to the property in 2020, if anything? the PAL gets carried over until the property is disposed of in a fully taxable transaction.

so if you remove schedule E, the PAL will disappear. you will have to keep track of it outside of Turbotax. 

[kysf]

We lived there for two years.  Each year we have used the PAL to offset other passive activity income.  There does not appear to be a way to add this to Turbo Tax (our first year using it) which would enable us to continue to offset the passive income.

I don't want to eliminate the Schedule E but Turbo Tax does not seen to allow me to input this info from previous tax returns.

[kysf]

We lived there for two years (2020 - 2022).  Each year we have used the PAL to offset other passive activity income.  There does not appear to be a way to add this to Turbo Tax (our first year using it) which would enable us to continue to offset the passive income.

I don't want to eliminate the Schedule E but Turbo Tax does not seen to allow me to input this info from previous tax returns.  I'm trying to figure out how to add this information into Turbo Tax Premier.

[DianeW777]

You cannot continue to offset your passive loss against other income when you no longer have the property as a rental activity.  It becomes suspended until you sell the property.  When that occurs, then you can use the remainder of your passive activity loss (PAL) carryover, as indicated by Mike9241.

If  you choose to convert the property to personal use, then the depreciation will still need to be recaptured when the property is sold.  You will need to retain your records until you sell the property.  Likewise the suspended passive activity losses (PALs) can be use in only two circumstances:

1. Against passive-activity income
2. When you dispose of the passive activity in a fully taxable transaction to an unrelated party

Active participation is a requirement to be allowed to reduce other income by the loss on your rental property.  There is also an income limit that begins to reduce that amount.

Phaseout Rule: The maximum special allowance of $25,000 ($12,500 for married individuals filing separate returns and living apart at all times during the year) is reduced by 50% of the amount of your modified adjusted gross income that’s more than $100,000 ($50,000 if you’re married filing separately). If your modified adjusted gross income is $150,000 or more ($75,000 or more if you’re married filing separately), you generally can’t use the special allowance. This is because the special allowance is reduced to $0 since the modified adjusted gross income is over the $100,000 amount.

• Sign into your TurboTax return > Search (upper right) > Type rentals > Press enter > Click on the Jump to... link > Edit next to the Rental Activity  > Edit next to the Property Profile or General Info > Continue to the question about active participation
• Continue to the end of the section for TurboTax to save your changes.

@kysf