Question

Passive loss on rental property when moving out of California

Forum|Forum|4 years ago
March 20, 2022
1 reply
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Hi,

I have an overseas rental property on which i have a new unallowed loss (rental minus depreciation) as it considers my income as too high. Every year that loss is shown under passive loss limitations worksheet.

I moved out of California in 2021 and while filling my tax returns for California, Turbo tax asks me if i have passive loss carry over. Should I be entering something there given that the loss is not allowed in my federal return and probably in my prior year California returns too?

Thanks

PatriciaV

Employee

Yes, continue to report your Passive Loss Carryovers for both your Federal and State returns. This historical information will be useful if you ever sell the property or if your income drops to allow you to take those losses.

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G

goyal_rajAuthor

Thanks PatriciaV.

Since I moved to another state mid year, how would that impact the passive carry over loss? Would the entire loss be attributed to the new state now? Or do I have to make it proportionate i.e. only from the start of the new state's residency? Since I no longer live in the previous state, that loss has no meaning for that state anymore, so it should be carried over to the new one in my opinion. Please share insights.

And where do I enter the loss separately for rental property and short term loss on investments?

Thanks,

D

DianeW777

Yes, this loss when used will only be considered on the state return where you live when you sell it or have income to utilize the loss on future returns. The capital loss carry forward can be entered following the steps in the link below.

How do I enter my capital loss carryover?

Entering the passive activity loss carry forward for your rental activity should be completed as follows:

Click the Federal Taxes tab
Click Wages & Income
Scroll down to the Rental Properties and Royalties section
Click the blue Show More in this section
Click Start (or Revisit) next to Rental Properties and Royalties (Sch E)
Click Yes
Click Continue
Click the blue Edit button next to the rental you'd like to add info for
Click Continue until you reach the screen entitled Do any of these situations apply to this property?
Scroll to the bottom of this page and check the box next to I have passive activity real estate losses carried over from a prior year. (see image below)
Click Continue