Whay can't I deduct rental loss

Forum|Forum|6 years ago
June 1, 2019
2 replies
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Turbo tax calculates our rental unit lost $10k. This is accurate. However, I can't deduct the loss. Why

TurboTax Premier Online

Best answer by LindaA

In general, the passive activity rules limit your ability to offset other types of income with net passive losses. However, if you actively participate in a rental real estate activity, you can deduct up to $25,000 of your rental loss, even though it is a passive activity. During the tax interview, TurboTax will ask ask if you qualify as an active participant. You might want to revisit the rental section of TurboTax and make sure you indicated you were an active participant (click the attachment below to enlarge it for reference). Note that as your income increases, this exception to the passive activity rules phases out. The exception decreases as your modified adjusted gross income (MAGI) goes above $100,000 and is completely phased when your MAGI exceeds $150,000. For more information, please see Real Estate Tax and Rental Property.

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LindaAAnswer

Employee

In general, the passive activity rules limit your ability to offset other types of income with net passive losses. However, if you actively participate in a rental real estate activity, you can deduct up to $25,000 of your rental loss, even though it is a passive activity. During the tax interview, TurboTax will ask ask if you qualify as an active participant. You might want to revisit the rental section of TurboTax and make sure you indicated you were an active participant (click the attachment below to enlarge it for reference). Note that as your income increases, this exception to the passive activity rules phases out. The exception decreases as your modified adjusted gross income (MAGI) goes above $100,000 and is completely phased when your MAGI exceeds $150,000. For more information, please see Real Estate Tax and Rental Property.

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taxjedi1

I'm having the same issue, my rental property unit resulted in 13k loss and I specified that I'm an active participant. My Schedule E (Form 1040) on the resulted return reports the 13k loss on line 21 (Subtract 20 from 3 and 4), but it is still empty on line 22 (Deductible rental real estate loss after limitation, if any, on Form 8582) and the deduction is not applied to "total rental real estate and royalty income or loss" field. My line 25 (Losses) is also empty as a result.

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GeorgeM777

It appears you have limitations based on your income. What is your modified adjusted gross income? If it is $150,000 or more, there is no special allowance for loss deduction for those with active participation. On Form 8582, do you have amounts on lines 7, 8, or 9? If so, what are they?

@taxjedi1

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Carl11_2

Employee

Thats because passive losses can only be deducted from passive income. Once those passive losses get your taxable passive income to zero, that's it. You can't deduct any more. The excess is carried over to next year where it will be deducted *IF* you have the passive income to deduct it from. That would be rare.

in fact, it's more common for your passive losses on rental property to increase with each passing year. You can't actually "realize" those losses until the year you sell or otherwise dispose of the property. You'll see those carry over losses on IRS Form 8582 line 1d.