Your Life

Your Life

Major life milestones often have a major tax impact. Changes in your marital status, having a baby or adopting a child can have significant impact on your taxes. This is the place to ask questions about dependents, real estate, and other various scenarios that play a significant role in what taxes you pay.

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Pioneer
Posts: 2
Registered: ‎04-03-2017

K1 loss causes tax increase

I am using the H&R block software and had completed my 2017 return except for two k1s that I hadn't received (one a partnership and one an s-corp). The software showed that I was going to receive a refund. The K1s arrived today and they were both showing ordinary income losses (a passive loss of $850 and a non-passive loss of $6,000). These are included on my schedule E along with income from a rental property. Line 41 on schedule E showed a net loss of $900. When I entered the K1 info into the software, the amount of my expected refund went down $330.  Any ideas as to why entering a loss would decrease my refund?

Tax Pro
Posts: 5,070
Registered: ‎02-23-2016

Re: K1 loss causes tax increase

Hi mcflannery0816,

 

Welcome to the H&R Block community.

 

When you have a loss of any kind (except for a passive loss which usually offsets only passive income) some or all of the loss (depending on the rule for the type of loss it is) will be deducted against your income on Form 1040.  Because of the reduction in your income (including earned income), other things on your tax return will be affected.  The one that most often affects your refund is the earned income credit.  For example the EIC decreases when your income decreases if you have a child and your income is below $24,000.  There are also other credits that may have been affected by a drop in income.

 

The non-passive loss is what affected your refund and if you claimed the earned income credit then that's more than likely what caused the decrease, but again it could be any number of things that were affected by that loss.

 

If you have any other questions I'll be glad to help.

 

Louis,
Senior Tax Advisor (Tampa, FL)

Pioneer
Posts: 2
Registered: ‎04-03-2017

Re: K1 loss causes tax increase

Thank you for your reply! We do not qualify for the EIC, so it wouldn't be that. Any other ideas? I am just concerned that there is a mistake in the return or that I am not entering something correctly.