I have passive rental losses, but my income is over $150k; why does it allow me to use the loss this year?

Forum|Forum|4 years ago
April 15, 2022
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Isn't it IRS rule, once your income reaches $150K, you will not allowed to use the loss to offset your current year income?

I did at the very beginning of the Interview, already answered that I am not qualified as "active participating".

I would not think the software has this bug, but where did I do wrong?

TurboTax Home & Biz Windows

Best answer by AliciaP1

Since your rental activity is derived from passive activities at only 5 days of personal use, you cannot claim the loss against your non-passive income. When you change the personal usage to 30 days the home now qualifies as a second home, not a rental, and stops being passive income. You need to correctly report your usage, and if this means you have passive losses, you will be able to carry them forward until you sell the property and will be able to claim all applicable losses at that time.

For more information on losses and carryforwards see Publication 925.

JerseyBird68Author

Okay, I notice one thing:

Of my three rental properties, one is my vacation home, which I rent it out most of the time. If I put my personal use for 5 days, the rental loss will be carried over, Form 1040 Line 5 will be 0.

However, if I put personal use as 30 days, (it is on the market for 11 months, but actually only renter occupied for 90 days), then the combined net rental income (which is loss), will be permitted in 1040 Line 5, to offset this year's income.

-Does that make sense? Is that correct? My income is still above $150k, why can I claim loss? Why more personal use on one of the rental properties should change this entire rental income status?

I used to use another tax software; this is my first year switched to Turbo tax. The other software still not allow to use the rental loss, regardless I put down 5 days or 30 days. Vs Turbo tax gave two completely different answers.

Thank you for your help in advance!