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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
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Experience:  15years with H & R Block. Divisional leader, Instructor
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I rent out half of my house and generate a loss

Resolved Question:

I rent out half of my house and generate a loss from that activity. This year the loss was greater than all my other income, and thus my AGI is negative. What do I do?
At first I started carrying it back on form 1045, but was informed that a passive real estate loss does not qualify for that treatment.  Is that correct?

Can I do something with this loss?  Maybe claim it somehow on a past or future return?
Submitted: 2 years ago.
Category: Tax
Expert:  Robin D. replied 2 years ago.

Robin D :

Hello and thank you for using Just Answer.
If your deductions for the year are more than your income for the year, you may have a net operating loss (NOL). An NOL year is the year in which an NOL occurs. You can use an NOL by deducting it from your income in another year or years.
You can carry the NOL back two years and then forward until used or you can choose to just carry the extra loss forward and forgo the carryback.

Robin D :

To make this choice, attach a statement to your original return filed by the due date (including extensions) for the NOL year. This statement must show that you are choosing to waive the carryback period under section 172(b)(3) of the Internal Revenue Code.

Robin D :

If you carry back your NOL, you can use either Form 1045 or Form 1040X. You can get your refund faster by using Form 1045, but you have a shorter time to file it. You can use Form 1045 to apply an NOL to all carryback years. If you use Form 1040X, you must use a separate Form 1040X for each carryback year to which you apply the NOL.
If you carry forward your NOL to a tax year after the NOL year, list your NOL deduction as a negative figure on the Other income line of Form 1040.
You must attach a statement that shows all the important facts about the NOL. Your statement should include a computation showing how you figured the NOL deduction.

Robin D :

I hope the above is helpful but you are not sure how to handle your NOL after reading the info then you will want to go to a professional for at least the first year dealing with your NOL.
Thank you in advance for clicking ACCEPT.

Customer:

I'm confused because I've read that does not apply to Passive Activity Losses, which are in a separate category from business losses. Are you sure the procedure you described is correct for passive activity losses?

Robin D :

It cannot be carried back but it can be carried forward.

Customer:

thanks. do i report it on next years 1040 or on the schedule for the rental property, or somewhere else?

Robin D :

You will show it on the Form 8582 for unallowed losses and carry forward

Customer:

thanks

Robin D :

You are welcome

Robin D :

You can always come back even after you click accept

Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7870
Experience: 15years with H & R Block. Divisional leader, Instructor
Robin D. and other Tax Specialists are ready to help you
Customer: replied 2 years ago.
Umm, where on form 8582 would I report this? I don't think this is a "prior year unallowed loss" since the loss was allowed (not capped)....it just was useless since it flowed through to a negative AGI.
Expert:  Robin D. replied 2 years ago.

Let me ask you one question which seems to have missed my attention earlier. You are showing a loss greater than the $25000 allowed for rental (based on income and participation)?

Customer: replied 2 years ago.
No, it below that cap. Rental loss is around $14,00.

Here's the front side of my Form 1040:

Wages: 0

Interest & dividends: 7,000

Capital gains: -3,000

rental loss: -14,000

AGI: -10,000

Expert:  Robin D. replied 2 years ago.
Basically all you are going to be able to do is use this loss when and if you sale the property. You can only carry it forward until you sale it. This would then help you to lessen any tax on the side of the recapture when you sale. Yes, you would be allowed to claim your home exclusion when you sale but only on the part of the home that you used, you will be allowed to claim the losses that you could not use only in the year of sale. You do not carry it forward and use against next year (unless you sale the property next year).
You can only use the remaining loss when you sale. There is nothing for you to do other than that.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7870
Experience: 15years with H & R Block. Divisional leader, Instructor
Robin D. and other Tax Specialists are ready to help you

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Robin D.
Robin D.
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15years with H & R Block. Divisional leader, Instructor