Some of the expenses on OIH (mort int and prop taxes I think) will be allowed and create a negative on Sch C....it should automatically carry forward any unused portion...look down at the very bottom of the 8829 for the carryover amount.

You can't rely on the software for this.  If they did NOT itemize then ALL of the OIH expenses carry forward.  If they did itemize then you get to deduct the OIH share of the mortgage but maybe not all of the taxes if they hit the SALT cap.

At least that's my understanding.

Perhaps I'm not asking my question correctly. My concern is that OIH should not be used to create or increase a Schedule C loss. How do I modify the "allowable" OIH expense to avoid counting that expense on Sch C?

Thank you!