Hello, I will try to assist you in applying the passive activity rules the expert provided in Turbo Tax.
It sounds like you have already found the step by step interview section for rentals. Sometimes it is tricky to use the interview method because even if something is marked wrong, Turbo Tax won't ask the question again.
To check you entries, use the forms method. From the top right select the forms button. Look for the Schedule E worksheet for your rental activity. Make sure the following items are selected:
You should have 365 days rented at fair rental value. Box C for active participation should be checked. The other boxes A-H should be blank. Also, double check the AGI limit - make sure your AGI is under $100,000. There are also some limitations if you are filing Married Filing Separately.
I hope this answers you question. Please let me know if you need additional information.
Another expert here.
You say you are married filing separately with an AGI of $104,000. That changes the answer a bit. If you and your spouse have lived together at any time in 2011, the $25,000 allowed loss deduction the previous expert spoke of is reduced to $12,500 for MFS while the AGI limit is reduced to $50,000 from $100,000. So, since your AGI is over $100,000, your special rental loss allowance of $12,500 has phased out completely for 2011.
If you and your spouse did not live together at any time in 2011, this MFS reduction to $12,500 does not apply, but instead you revert back to the $25,000 loss limitation. Turbo Tax should have asked you if you and your spouse lived together at any time in 2011 when you marked you were MFS.
If this answers your question, please click the accept button as this is the only way we get paid for the assistance we provide to you. If you need more clarification, please let me know. If I am not available at the time, I will be. I appreciate the opportunity to assist you and I look forward to your response.Stephanie
The Box C I was referring to is on the Turbo Tax Schedule E Worksheet, not the actual tax form.
I see another expert has already responded, and I agree it appears your real issue limiting your passive activity deduction is filing married filling separately.
I am at the same place that you are at in TurboTax Premier. I have put in your estimate income and a loss on rental of $25,000. When I get to the screen that says Your profit or loss results so far, the rental house shows a profit of zero. The "such as what" link says that MFS and living together reduces the losses to zero and MFS but living apart all year limits your losses to $12,500.
This is why it isn't giving you any loss and suspending the entire loss. I reviewed my tax guide, and see I misread the limitation. When I told you there was no reduction of the $25,000 if you lived apart all year, I was incorrect. There is no loss allowed at all if you lived together at all in 2011. If you lived apart all year, such as is your case, you are limited to the $12,500. Here is the link to Pub 527 that discusses this issue. I am sorry for the incorrect information earlier. http://www.irs.gov/publications/p527/ch03.htmlKeep in mind your losses are not gone completely. They are disallowed and will carry over to future years when you have profit, your AGI reduces below the limits, or you sell the property. Again, I am sorry for the misinformation on the MFS limitations.
You should have a carryover worksheet in your tax file. Under Passive Activity near the bottom of the sheet will show the carryover loss for each rental property you report on your Schedule E. There are also passive activity worksheets for each property that show the "losses suspended to next year". This would be what you would report on your 2011 as carried over. You should also be able to look at Form 8582 in your 2010 tax return. Line 5 will show the total passive loss, line 10 is the amount of loss taken on your 2010 return, and the net (which isn't calculated on that form) will be what you carry over to the next year.
1) Here is the link to the Turbo Tax instructions on amending a prior year return. You will have to send a paper return as the IRS does not allow for electronically filed amended returns, yet. http://turbotax.intuit.com/support/iq/Amend-a-Return/How-to-Amend--Correct-or-Update--a-2010-Tax-Return/GEN13226.html
2) I would not wait for the IRS to process the changes. I would go ahead and amend my 2010 and then file my 2011 with the correct carry over.
3) Probably not, if your situation is the same in 2010 as it was in 2011. However, you want this to be correct because if you do get to the point you are able to deduct your passive rental losses, you don't want to be limited to only the passive income that is received. There would be no additional loss allowed.
Possibly. I would review my 2010 and 2011 returns side by side line by line to see where the differences are. It could have something to do with the rentals or nothing at all.
For a capital gain distribution, you can report them directly on line 13 of the 1040, and check the box that Schedule D is not required, if both the following apply....1) The only amounts that are to be reported on Schedule D are from the 1099-DIV and 2) None of the 1099-DIVs have an amount in Box 2b, 2c, or 2d. If these are true, you will not have the Form Schedule D, but the capital gain will still apply so it is on Line 13 of your 1040.
When you completed the Form 8582, you said the numbers from your rental activity flowed to lines 3a, 3b, and 3d. They should have flowed to lines 1a, 1b, and 1d. Then they would flow to Part II of the 8582 and then to Part IV. When you amend a tax return, you complete the return making all the corrections. The 1040X will then show the numbers from the original return in Column A, the numbers from corrected return in Column C, and the net change in Column B. You include the 1040X, the 1040, and any changed schedules/forms such as Form 8582 and Schedule E with the amended return. In your situation, if you are not able to take any of your loss due to your AGI limitations, your 1040X may not have any changes to the numbers. However, you will have a change to the Form 8582 showing the passive activities losses and carryovers correctly reported on the correct rental activities lines. This will affect how the losses are carried over and when you can deduct them in the future.
Line 17 on the 1040X asks for the amount of the overpayment on the original return. You enter the refund amount there from your original tax return. If you do not have any additional refund, you leave 20 and 21 blank. If you have an additional refund, you enter that on line 20 and 21.