Carryover of unallowed loss from prior year to a different rental property

Forum|Forum|1 year ago
February 1, 2025
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I have two rental units A and B and my MAGI is too high to allow any passive loss to be applied on active income.

In 2023 A has $10,000 loss and B has $3,000 loss. Both were disallowed last year.

In 2024 we moved into A and no longer rent A out for any single day in 2024. I noticed Turbotax automatically discard the $10,000 loss since we no longer rent it out. Turbotax only carried over the $3,000 loss to B for 2024.

In this case, does mean the $10,000 loss is wasted? If we do not plan to rent A out again, anything we can do to use that loss in future?

Not A Product Question

AmeliesUncle

@stanley1231 wrote:

In this case, does mean the $10,000 loss is wasted?

If we do not plan to rent A out again, anything we can do to use that loss in future?

No, it means that TurboTax is faulty and does not continue to carry it forward.

That loss can still be used against any Passive Income. Or if/when the property is sold in a "fully taxable transaction", it can be used then.

As for what to do because of TurboTax's faultiness, it depends. Because you have another rental, you may consider continuing to report that as a rental property (with no income and no expenses), just so you can continue to report the Passive Loss Carryover. Your tax return will incorrectly show it as a rental, but the end result shouldn't be problematic.

Mike9241

you will also have to keep track of the depreciation taken on A. if you sell it in a fully taxable transaction the depreciation previously taken has to be recaptured as section 1250 Gain. There have been horror stories in this community about taxpayers who didn't keep track and then sold the property and asked in this forum what should they do because they no longer had the necessary records.