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A question related to Schedule E Rental Loss Limitation

I meet a wired question. I know that the rental real estate loss allowance is a federal tax deduction available to taxpayers who own and rent property in the U.S. Up to $25,000 may be deducted as a real estate loss per year as long as the individual's adjusted gross income is $100,000 or less. However, one of my client has two rental properties on schedule E. The first rental property has loss of $87,915, an one schedule E line 26 of the tax return, all $87,915 is tax deductible. The second rental property has loss of $9,733 and total not deductible on schedule E, and the whole $9,733 was sent to the form 8582. 

So my question is, why this person can take and deduct the whole $87,915 rental loss (over $25,000 limitation) of the first property on his individual tax return in Lacerte? Is there any rule that I did not realize?

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Level 15

It likely has to do with the input for the property. My best guess is that Rental #1 is marked as Not Passive. Look at the input in one of the top sections for General Information. 


ex-AllStar

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Highlighted
Level 15

It likely has to do with the input for the property. My best guess is that Rental #1 is marked as Not Passive. Look at the input in one of the top sections for General Information. 


ex-AllStar

View solution in original post

Highlighted
Level 15

Or, was Property 1 sold?


ex-AllStar