Schedule E carryover worksheet: Disallowed Passive Losses?

[writermom3]

 I have a vacation home that I rent out for part of the year. I take a loss each year as my income from the rental does not pay for my expenses. Under "disallowed passive losses by year and type," TurboTax for tax year 2020 is asking for QBI, for 2019, Line G, Operating Loss. (see photo attached.) Where do I find this figure (in the yellow space)? It must be on my 2019 taxes but I'm not sure where to find the figure. 

[DianeW777 · Accepted solution]

Your vacation rental may not qualify for the qualified business income deduction (QBID). If that is the case, your carryover would be zero.

In your 2019 TurboTax file look for any worksheets labeled Carryover (8995 worksheets specifically).

The IRS finalized the safe harbor rules for rental properties.

This safe harbor is available for taxpayers who seek to claim the section 199A deduction with respect to a "rental real estate enterprise." Solely for purposes of this safe harbor, a rental real estate enterprise is defined as an interest in real property held to generate rental or lease income. It may consist of an interest in a single property or interests in multiple properties. The taxpayer or a relevant passthrough entity (RPE) relying on this revenue procedure must hold each interest directly or through an entity disregarded as an entity separate from its owner, such as a limited liability company with a single member.

The following requirements must be met by taxpayers or RPEs to qualify for this safe harbor:

1. Separate books and records are maintained to reflect income and expenses for each rental real estate enterprise.
2. For rental real estate enterprises that have been in existence less than four years, 250 or more hours of rental services are performed per year. For other rental real estate enterprises, 250 or more hours of rental services are performed in at least three of the past five years.
3. The taxpayer maintains contemporaneous records, including time reports, logs, or similar documents, regarding the following: hours of all services performed; description of all services performed; dates on which such services were performed; and who performed the services.
4. The taxpayer or RPE attaches a statement to the return filed for the tax year(s) the safe harbor is relied upon.

[writermom3]

Thank you Diane! I found form 8995 from my 2019 taxes, and sure enough, under my vacation condo, it said ZERO. Whew! It was driving me crazy.

Quick follow-up: is the loss not allowed b/c we are over the income threshold? Or are there other criteria for QBID?

[ThomasM125]

You may be denied the QBI deduction because you have a rental activity, regardless of your income. As mentioned by @DianeW777, you have to maintain separate books and have a certain number of hours invested in order to treat a rental activity as a qualifying business for QBI purposes.