Rental Property: Offsetting losse from prior year

Forum|Forum|1 year ago
March 7, 2025
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I own a rental home, which I have rented out for the years 2023 and 2024, and expect to do the same for the foreseeable future. I am an active participant in selecting renters, hiring the work done, and deciding on capital outlays. This involves less than 100 hours annually. In 2023 I sustained a loss of $(7,934) but in 2024 I made a profit of $7,396. Can I offset the loss from 2023 to the extent of the net income in 2024. If so, what sections on form 8582 would I complete? I have to file a paper copy this year.

AmyC

Employee

It depends on your income. MFS has different rules.

If your AGI is less than $150,000

Your active participation means that the loss last year would have been deducted from your income (up to $25,000)
Your rental Sch E income goes to Sch 1 line 5. Take a look at last year's return and you will see the rental loss in there.

If your AGI was higher:

Your passive income loss was not allowed and is carried forward to go against passive income this year.
Form 8582, Passive Activity Loss Limitations Part IV is completed to fill in part 1 line 1c with last year's loss. In part II, you can see the income come into play with the calculations.

The program will do the work for you and you can print, sign, and mail with tracking.

Reference: Instructions for Form 8582, Passive Activity Loss Limitations

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w961hmkAuthor

I figured it out last night. Looks like I did right. Thanks for your response. Now I have another question: I am the legal guardian of my 20 year old nephew who is a full-time student at a trade school, who lives with me, and I provide much more than 50% of his support. I have no adopted him, I am merely the legal guardian. His mother passed away. I am filing a paper copy, and in the "Dependents" section on the first page of the 1040, should I check off the box that says "Child tax credit" or "Credit for other dependents"?

Hal_Al

Employee

Q. Should I check off the box that says "Child tax credit" or "Credit for other dependents"?

A. Credit for other dependents

Your nephew meets the rules to be a "Qualifying Child" dependent. But to get the Child Tax credit, he must also be under age 17.

There are two types of dependents, "Qualifying Children"(QC) and Other ("Qualifying Relative" in IRS parlance even though they don't have to actually be related). There is no income limit for a QC but there is an age limit, student status, a relationship test and residence test. Only a QC qualifies a taxpayer for the Earned Income Credit. They are interrelated but the rules are different for each.

The support test is different for each type. The support test, for a QC, is only that the child didn't provide more than half his own support. The support test for a Qualifying Relative is that the taxpayer provided more than half the relative's support.

See full dependent rules at: https://turbotax.intuit.com/tax-tools/tax-tips/Family/Rules-for-Claiming-a-Dependent-on-Your-Tax-Return/INF12139.html