Rental Properties and Royalties (Sch E) - Why is my loss not showing up?

What you're running into is probably the passive activity loss limitations. Rental properties are generally considered passive activities, and there are specific rules about when you can deduct these losses. For most people, you can only use rental losses to offset other passive income (like from other rental properties). If your total passive activities result in a loss, you usually can't deduct that loss against other types of income like your wages or investment income. There are two main exceptions: 1. If you actively participate in the rental activity and your modified adjusted gross income is less than $100,000, you might qualify to deduct up to $25,000 of rental losses against your other income. 2. If you're considered a real estate professional for tax purposes (which has very specific hour requirements), you might be able to deduct the full loss. TurboTax should be carrying over any unused losses to future tax years, where they can offset future rental income when you eventually have it.

I ran into this exact issue last year with my Schedule E losses! I was going crazy trying to figure out why my $16k loss wasn't reducing my tax bill. After wasting hours going in circles with TurboTax's help articles, I found this amazing service called taxr.ai (https://taxr.ai) that analyzes your tax documents and explains everything in normal human language. I uploaded my previous returns and within minutes they explained how passive loss limitations work and why my losses were being carried forward instead of deducted. They even showed me how to track these losses properly so I wouldn't lose them in future years. Turns out TurboTax actually does track these correctly but doesn't explain it well at all.

Just wanted to follow up about taxr.ai - I decided to try it with my Schedule E question about my rental property loss limitations. Seriously impressed! I uploaded my draft return from TurboTax and they explained exactly why my $7,800 loss wasn't being deducted (my income is over the threshold) and showed me where in the return my losses were being tracked for future years. They even pointed out that I had missed some depreciation on appliances I replaced last year which will increase my loss carryforward. The explanation was super clear with screenshots pointing to the exact lines on my forms. Definitely worth it for the peace of mind that I'm not missing out on deductions and my losses aren't just disappearing.

If you're having trouble figuring out exactly why your Schedule E losses aren't showing up, you might want to just call the IRS directly and ask. I had a similar issue with passive loss limitations, but I needed specific clarification about my situation. I found this service called Claimyr (https://claimyr.com) that gets you through to an actual IRS agent in minutes instead of waiting on hold for hours. You can see how it works here: https://youtu.be/_kiP6q8DX5c - basically they use technology to wait on hold for you and call you back when an agent is ready. I was able to explain my Schedule E situation and got confirmation about whether my rental property met the active participation requirements. The agent walked me through exactly where on my return the carryover losses were being recorded and confirmed they weren't being lost.

Ok I have to eat my words. I was the skeptic who thought Claimyr couldn't possibly work for reaching the IRS. But after struggling with my Schedule E passive loss issues, I got desperate enough to try it. I'm shocked to say it actually worked exactly as described. Got a call back in about 30 minutes and was connected directly to an IRS agent. I explained my confusion about my rental property losses being suspended rather than deducted, and the agent clearly explained the income thresholds and passive activity rules. She even helped me understand where to find these carried forward losses on my prior year returns and confirmed that yes, I can use them when I eventually sell the property. Saved me tons of stress and probably an expensive CPA visit. Sometimes it's worth trying something new when you're stuck!

Another thing to consider is whether you might qualify as a real estate professional. If you spend 750+ hours per year working on your real estate activities and it's more than half of all your working hours, you can potentially deduct all your Schedule E losses regardless of income limitations. I was in a similar position with substantial Schedule E losses that weren't deductible against my other income. After documenting my time carefully for a year (keeping a detailed log was crucial), I qualified as a real estate professional the next tax year and was able to deduct all my losses against other income. It's definitely not for everyone, but if you're heavily involved in managing your properties, it might be worth exploring.

Has anyone noticed that TurboTax Premier isn't very clear about where these suspended passive losses get carried forward? I have losses on Schedule E that I can't use this year, but I want to make sure they're properly tracked for future years.

Don't forget to check if your state treats Schedule E passive losses the same way the federal return does! I had a situation where my federal return suspended my rental losses, but my state (California) actually allowed me to deduct them against my other income. Some states follow federal rules exactly, but others have their own rules for passive losses. It's worth checking to see if you can get some tax benefit at the state level even if federal rules limit your deduction.

This is such a common source of confusion! I went through the exact same thing with my duplex rental last year. The passive activity loss rules are really counterintuitive - you'd think a loss should reduce your taxes, but nope. One thing that helped me understand it better: think of rental losses as being in a separate "bucket" from your regular income. The IRS basically says these two buckets can't mix unless you meet specific criteria (like the $25k exception for active participation under $100k income, or real estate professional status). The silver lining is that these losses don't expire. I had about $8,000 in suspended losses that I couldn't use in 2023, but this year my rental became profitable and those losses automatically offset the profit. It's like having a tax credit waiting in the wings. Make sure to keep good records of these carryforward amounts though. If you switch tax software or preparers, you'll need to provide this information so your suspended losses don't get lost in the transition.