Where to report passive income to be offset by passive loses in turbotax

Forum|Forum|1 year ago
February 9, 2025
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I have small lending business and have passive income from it, if I report it under "Self employment" income - Mortgage lending(Business code 999000) it will be offset by passive loses(K1) from prior year on tax form, but it will add "Self employment taxes" on 1040. If I report it under 'Miscellaneous Income' it will not add "Self employment taxes" on 1040, but will not be offset by passive losses.

Where should I report this income to be offset by passive loses from prior year and will not add "Self employment taxes"?

AmeliesUncle

Why do you think your business is not subject to self-employment tax?

Your business is passive? That is extremely unusual. Do you not "Materially Participate" in the business?

segorAuthor

I did only 4 transaction last year. In most cases I just do wire transfer and few minutes communication. All major work done by title company.

I think I do "Materially Participate" the same way as for my investment account in Fidelity where I have 'interest' income, but it is not related to real estate.

Second question: Why turbotax offset this income with passive loses if it considered as an active income?

BrittanyS

You will report passive income and losses on the Schedule E. Per, the IRS, "Use Schedule E (Form 1040) to report income or loss from rental real estate, royalties, partnerships, S corporations, estates, trusts, and residual interests in real estate mortgage investment conduits (REMICs)". To report passive income follow these steps:

Sign into TurboTax
Search for Schedule E
Click the Jump To Link
Answer Interview questions.

Passive losses will only offset passive income. You can enter the passive loss in TurboTax and if it exceeds the loss for the income in the current year, the loss will be carried forward to the next tax year.

For more information, see the links below:

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