Rental activity is normally considered a passive activity. Because of this, any losses on rental property that cannot be offset by rental property income are disallowed (“unallowed”). Unallowed losses are not deductible in the current year but can be carried forward to future years to offset future passive income.
Two exceptions to this rule are that real estate professionals can deduct losses in the year incurred, and losses are also allowed when the property has been sold or otherwise disposed of.
For more information on loss rules see the IRS publication and form instructions below.
In TaxSlayer ProWeb, prior year unallowed losses pull forward to the current year's return and show in the property's Expense Menu under Unallowed Loss.
To enter (or view) the prior year unallowed loss on rental property, from the Federal Section of the Tax Return (Form 1040) select:
- Income
- Schedule - Select the property.
- Expenses
- Prior Unallowed Loss - Enter the amount of the prior year unallowed loss.
Note: This is a guide on entering prior year unallowed rental losses in Schedule E in TaxSlayer ProWeb. This is not intended as tax advice.
Additional Information:
IRS: Passive Activity and At-Risk Rules
IRS: Instructions for Form 8582 Passive Activity Loss Limitations