Why rental property loss can be used to offset the other incomes (e.g. W2) in TurboTax?

[Cangoal]

This doesn't make sense, I am not sure what I did wrong, this year is the first year of rental property (converted from a primary residence).

I selected "No" to "active participant" and "No" to "Real Estate Professional", and my AGI is over $150, 000, so there is no way I can deduct this rental property loss.

Does anyone have ideas? Thanks!

Edit: when I wrap up my income, TurboTax shows me the  "Your Profit or Loss Results" page, it shows "Your deductible loss: -$xxx.xx" and "what you will see on your 1040 at this point: -$xxx.xx", the amount are the same negative number. Then in the end, it says "But wait! These amounts may change based on other limitations, such as what?".

So it looks that TurboTax already detected this issue, but it didn't instruct me how to fix it. In the left panel, I clicked "Review", then it says both my federal and state return are good to go. But I know this is wrong...

[Mike9241]

we can't see your return so if want our help look at form 8582 and tell us what lines have numbers and whether they are income or losses, we don't need actual amounts.

do you have other passive activities with income? 

[AmyC]

As a passive participant, with an income over $150,000, you will carry over the losses to next year. The loss may go against gains next year or collect more losses. Most people have a big tax bill when they sell but if you gather all your losses, you won't have that problem. All losses are written off in the year of sale.

[Cangoal]

Thanks @Mike9241 .

I did see form 8582 in the generated PDF file, I selected both federal and state, and selected "Include government and TurboTax worksheets (optional)".

This is my first time to file tax for rental property, but I did step by step, no sure what I missed.

(I have only one rental property)

As for "other passive activities with income",  I have interests, dividends and capital gains (from stock investment), but I don't think these are passive income? 

[Cangoal]

 @AmyC 

Right, that's what I was expecting to happen. However, I am seeing the rental property loss is deducted this year, which doesn't make sense at all...

[JamesG1]

On your IRS form 8582, do you have entries in Part I under line 1, line 2 or both?  What line is the real estate loss on?  Are there any entries in Part II?

Please clarify.

[Cangoal]

@JamesG1 I think this is exactly my problem here. So in the TurboTax generated file, I didn't see form 8582. Though I am seeing line 22 on Form 1040 Schedule E is populated with a negative amount.

[ThomasM125]

@Cabgoal Are you sure that your adjusted gross income on line 11 of your form 1040 is more than $150,000? There may be some deductions that are lowering your adjusted gross income that you are not contemplating.

[Cangoal · Accepted solution]

@ThomasM125 

Yes I am sure I have more than $150, 000 after all deductions.

I think I've found the answer in https://ttlc.intuit.com/community/tax-credits-deductions/discussion/rental-property-loss-deduction/0...

I am exactly hitting that case, I live one month and more in the house and rented it out for the rest of year. So this should not be considered as passive activity.

Check details https://www.irs.gov/pub/irs-pdf/p925.pdf and section "Activities That Aren’t Passive Activities"

In other words, it seems ok for me to use this loss to offset my normal income this year...