Missing California Rental Loss Carryover

Forum|Forum|11 months ago
April 10, 2025
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I’m assisting a relative who is a non-resident of California with their taxes and need help to understand the treatment of a loss from their California rental property.

Due to a loss in 2023 from the rental house, that year their Federal Schedule E line 22 deductible real estate loss was $-1300. This loss was fully allowed on their Federal taxes, helping reduce their W2 income, so no Form 8582 was generated in TurboTax and there was no Federal loss carryover to 2024.

After factoring in California adjustments from differences from the Federal depreciation of the rental house and related assets, the CA 2023 rental real estate loss was $-1500, which is also the same amount entered on their CA Form 3801 Part III Line 11. As they had no other CA income, their CA AGI was also $-1500. Because they had a negative CA AGI they had no tax due to CA on their 2023 return.

However it seems to me that as there was no other CA income to offset that year there should have been a CA loss carryover to 2024. I can’t find evidence of that on their 2024 return I’m assisting with and am wondering if this is due to the loss being fully allowed on their 2023 Federal return? If they should have a CA loss being carried over to 2024, is there a way to create a state carryover in the program?

PatriciaV

Employee

The application of a passive carryover loss for a California rental property is shown on the California Schedule E Worksheet under the Activity Summary Smart Worksheet. Passive carryover losses appear on Line G of that worksheet. You may wish to review this worksheet for the tax return in question to verify the loss was applied correctly.

Also check the Carryover to 2024 Smart Worksheet at the bottom of the CA Sch E Worksheet to determine if there was a passive loss carryover for tax year 2024.

If that loss wasn't carried over to the current year Sch E Worksheet, you can manually enter this on the current year worksheet (Carryovers to 2024 Smart Worksheet, Line G). This can be done in TurboTax Desktop using Forms Mode.

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