Form 8582 – Passive Activity Loss Limitations is used to calculate the amount of any passive activity loss that a taxpayer can take in a given year.
Generally, passive activity losses are limited for income tax purposes because passive activity losses can only be offset by passive activity income. However exceptions apply for certain rental real estate activities and additional limitations apply to publicly traded partnerships (PTP). If a taxpayer's passive losses are limited in the current year, the losses can be carried forward until the passive loss is used or until the activity that generated the passive loss is sold or otherwise disposed. TaxSlayer Pro will automatically carryover any unused passive loss until used.
There are two kinds of passive activities.
- Trade or business activities in which the taxpayer did not materially participate during the year.
- Rental activities, even if the taxpayer materially participate in them, unless the taxpayer is a real estate professional. If the taxpayer did materially participates in the rental activity they are permitted to use a limited amount of any passive losses based on the modified adjusted gross income of the taxpayer. No passive loss will be allowed (unless the taxpayer is a real estate professional) if the taxpayer’s modified adjusted gross income is $150,000 or more ($75,000 or more if married filing separately).
Form 8582 is automatically generated by TaxSlayer Pro based on the entries that are made elsewhere on the return and the ability to edit Form 8582 in TaxSlayer Pro or remove it from the return is restricted. Specifically, certain adjustments to modify adjusted gross income (for Form 8582 purposes) and/or to adjust calculated entries pulled from Schedule D, Form 4797 or Form 6252 are permitted. However, if TaxSlayer Pro has automatically created Form 8582, it cannot be removed and a passive loss that is limited cannot be taken. Moreover, regardless of the number or complexity of passive activities the taxpayer has, only one Form 8582 is filed.
To review the calculation of any passive activity loss limitation, view Form 8582 from the main menu of the return select View Results.
To edit the Passive Activity Loss Limitations on Form 8582 - From the Main Menu of the Tax Return (Form 1040) select:
- Income Menu
- Rents, Royalties, Entities (Sch E,K-1,4835,8582)
- Form 8582 (Passive Activity Loss Limitations)
NOTE: This is a guide on entering Form 8582 into the TaxSlayer Pro program. This is not intended as tax advice.