Rental income from K-1

David_Smith
David_Smith Member Posts: 5 Newcomer
in Income

We have a rental property that is owned by an LLC. The property is use for both rental and personal use (more than 14 days). I am a partner in the LLC. As a partner I receive a K-1 form from the LLC with losses from the LLC. These losses are reported on Schedule E of my personal return.

IRS Publication 925 states

Activities That Aren’t Passive Activities

The following aren’t passive activities.

The rental of a dwelling unit that you also used for personal purposes during the year for more than the greater of 14 days or 10% of the number of days during the year that the home was rented at a fair rental.

When I fill out my FreeTaxUSA return how do I get the loss to show up as a nonpassive loss on Schedule E line 28 column (i)?

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Answers

  • rachels
    rachels FreeTaxUSA Agent Posts: 107

    Hi David_Smith,

    Looking at the options in our software, if you report a Partnership Schedule K-1 with rental income in box 2, the loss will usually be treated as a passive loss, subject to passive loss rules.

    At this time, the only way to get our software to report a K-1 rental loss as a nonpassive loss on Schedule E, line 28, column (i), would be to indicate that you "materially participate in this partnership's trade or business activities" and also "actively participate in managing the rental real estate activity related to
    this partnership." In addition to that, you would need to indicate that you are a real estate professional who worked more than 750 hours in real estate in 2024 (Income > Real Estate Professional).

    If you determine that you need to report your K-1 rental income as nonpassive (and you don't meet the three qualifications described above), you'll need to file your return using a different service.

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