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Unallowed losses when rental is converted to primary residence

Level 2

Taxpayer had prior unallowed rental losses due to income over $150k. Last year they made the rental their main home. Do I need to keep a blank Sch E and / or Form 8582 going forward in order to deduct these losses against a future sale? Or if they convert it back to a rental in the future? If so, how do I stop the losses from being allowed currently (since the taxpayers income is now under $150k)?

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3 Replies 3
Level 14

ProSeries doesn't do it correctly.

You are supposed to keep filing the 8582 and not file a Schedule E, but ProSeries won't let you do that.  I think most people just delete it all and manually keep track of the 8582 for when it is needed.  Filing a blank Schedule E and keeping the 8582 is another option, but then you would need to override to prevent the $25,000.

Level 11

I printed one for my friend/client who stopped renting the shore home several years ago. It has the c/o losses.

He sold it in 2019, so now I re-entered the losses.

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Level 2

Thanks for the info!

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