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03-28-2017 05:35 PM
I am a resident of Washington State and have a rental property in North Carolina. I complete a Federal Return and a NC return because I have only the rental property in NC. Rent does not cover expenses so there is a loss. Last year the loss on the property carried over as a Passive Loss but this year it is not carrying over the full amount of the losses. I don't know where it's calculating that from. The loss last year was -$18k and the full amount of that loss showed up as my only NC income. This year the loss is -$22k but only -$3k is showing up as my NC income.
Is there a yearly passive loss amount or does it max out?
I thought the loss form last year would be carried over as the "loss from prior year" and then the loss from the rental this year would be an additional $22k. Does the rental loss accumulate year after year? Should the NC income be -$22k?
03-28-2017 05:46 PM
Welcome to the H&R Block community.
A rental loss is deductible up to $25,000 if you actively participate in the rental activity (managing, etc.). However, if you do not have any income to reduce the loss will not appear on your tax return because it won't do anything for you. So my guess is you probably only had $3,000 worth of rental income during 2016.
A loss does carry forward, but you can only use it if you have income to deduct it against.
If you have any other questions I'll be glad to help.
Senior Tax Advisor (Tampa, FL)
03-28-2017 06:21 PM
Thanks Louise. I'm assuming that is what happened and it makes sense. On my North Carolina return only the remaining balance of the $25k is what is showing which must be the $3k amount that was not maxed out in Year 1 of the rental. One more question- We do actively participate and are planning on keeping the rental for a few more years and I was told that when the home is sold (which will happen eventually), we will get this loss back at that time.
1) How does that work?
2) For a rental loss is $25k the total amount you can claim as a loss for the entire ownership of the rental? If you kept it for 5 years and had a $18k loss each year you could only get back $25k of that amount when you finally sell it?