We purchased a condo in in the late 1990’s and rented it through 2008 with losses and they were all deductible.
During 2007 – 2009 we spent +/- $60,000 to refurbish it and added it to the basis for depreciation.
The last year of rentals was 2009 and we had a rental loss of +/- $14,000 which was NOT deductible.
For some unknown reason I deleted the history from my turbo tax and made a note to remember the unallowed loss if we ever sold it.
Well, now we are renting it again (2018 first year) and I wanted to ask two questions. I think!
1. Can I still get the benefit of the 2009 loss?
2. Do you have any idea how I can get it back in my TurboTax history?
Any help would be greatly appreciated
Let me start with the three "golden rules" when dealing with the IRS or any other taxing agency.
- You are guilty until proven innocent.
- The burden of proof is on the accused (that's you!), not the accuser.
- If it's not in writing, then it did not occur.
Most of this stuff you already know. But I'm saying it here anyway to provide clarity and understanding for others that may read this thread. When dealing with rental property it is rare for rental property to show a taxable gain each year, if you have a mortgage on it. This is because the property taxes, insurance and mortgage interest alone are usually enough to offset the rental income before you even get to any of the other rental expenses. Once the rental deductions get your taxable rental income to zero, any remaining deductions are just carried forward. So it's not at all uncommon for the carry forward amount to increase with each passing year.
In the year you sell or otherwise dispose of the property, all carry forward deductions can then be deducted from your other, ordinary income - but only in the year you sell or otherwise dispose of the property. Until such time those losses just "sit there". Additionally, in the year you sell the property all prior depreciation taken on the property is recaptured and taxed in the year of sale. Basically, the depreciation is subtracted from your cost basis, thus increasing the amount of your taxable gain.
If the property is sold at a loss, the depreciation recapture decreases your loss. It is also possible for a perceived loss to be an actual gain upon depreciation recapture. The recaptured depreciation is taxed at your normal tax rate, depending on what tax bracket you fall in, but has a minimum tax rate of "at least" 15%.
Can I still get the benefit of the 2009 loss?
There's no benefit to you in the year you place the property back in service. But those losses do need to be carried forward from your 2009 tax return, to your 2018 return. A vast majority of those losses are in the prior year's depreciation. All you need is the *total* of all depreciation already taken on the property. More than likely, that alone will be your losses, or darn close to it. Because you did property improvements, the in service date for those will vary. So you need the depreciation and start date for each one.
Now in the 2009 tax return where you removed the property from service and converted it to personal use, if you have a *complete* printout or .pdf file of that return, in there you will find three IRS Form 4562's related to that rental property. The two you need print in landscape format and resemble an Excel spreadsheet. One is titled Amortization and Depreciation Report, and the other is titled Alternative Minimum Tax Depreciation report. At an absolute minimum, you need the first report printout I mentioned. Without it, I can't help you and I seriously doubt anyone else in this public forum can either.
Do you have any idea how I can get it back in my TurboTax history?
Did you use the CD version of TurboTax to prepare your 2009 *and/or* 2008 tax return? If yes, did you save that return(s) in PDF format?
Did you use the online version of TurboTax to prepare your 2009 *and/or* 2008 tax return? If yes, do you still have access to that online account?
To check online account access if you forgot the password or login ID, use the recovery tool at https://ttlc.intuit.com/questions/1899319-account-recovery-request-for-your-turbotax-account