How do I answer the TurboTax questions for a Schedule K-1 (with a negative amount) to have it reduce my federal tax due?

[jjpuw06]

I'm trying to file the 2019 Schedule K-1 (Form 1065), return of Partnership (with my 1040), this is the first year the LLC existed. I can get my taxes due reduced in other programs, but cannot figure it out in TurboTax. Does TurboTax support net rental real estate income loss?

[tagteam]

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@jjpuw06 wrote:
Does TurboTax support net rental real estate income loss?

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Yes, but you need to select Rental real estate - Box 2 as the Type of Activity and then ensure that you enter the dollar figure as a negative number.

[jjpuw06]

Thank you. Correct, I am entering a negative number yet it still does not make any impact. Curious if anyone has successfully lowered their amount due using TurboTax. I am expecting to see a reduction but nothing happens.

[Anonymous]

did you actively participate or were you a passive investor?  rental income or losses by definition are passive items. if you are a passive LLC member, the passive loss can only be used to offset passive income. if active LLC member was your adjusted gross income before the rental loss over $150,000, then again no deduction.    review form 8582. 

[PerryR]

HACKITOFF has it right. Rental income/loss is by definition Passive. Passive losses can only offset passive income.
HOWEVER:
There are two exceptions that allow taxpayers to use passive losses to offset earned income:

1. The passive loss allowance:

Allows taxpayers with a Modified Adjusted Gross Income (MAGI) of less than $100,000 to deduct up to $25,000 of passive losses against their other income. This $25,000 deduction is phased out $1 for every $2 that MAGI increases above $100,000. This means that once a taxpayer’s MAGI exceeds $150,000, the passive loss allowance will have been completely phased out.

2. Qualifying as a Real Estate Professional. You must meet the following standards:

A. More than one-half of the personal services performed in trades or businesses by the taxpayer during the tax year are performed in real property trades or businesses in which the taxpayer materially participates

AND

B. The taxpayer performs more than 750 hours of services during the tax year in real property trades or businesses in which the taxpayer materially participates.

If the taxpayer does not qualify for either exception the Passive Losses become "Suspended Losses" and are carried forward to offset subsequent Passive Income or until disposition of the asset...in which case the suspended loss(es) are added to the Tax Basis of the asset

[rental3]

So if I qualify to be a real estate professional, what section of Turbo tax or question do I change to get the K1 loss to be recognized.  Do i check the box business AND rental real estate?  I cannot get the loss to reduce my income if the rental real estate box is checked.

[JamesG1]

There may be other issues that do not allow the loss to be reported.

Did you select All of my investment in this activity is at risk?

Did you answer Yes  at the screen Did you participate?

Do you have a cost basis in the investment?  Did you receive an IRS Form 7203 for S corporation basis?