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Need Previous Unallowed Passive Losses to be unlocked for Current year

Forum|Forum|4 months ago
February 11, 2026
5 replies
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I have a client that previously didn't qualify for the real estate professional rules and the losses on his rental property were being carried forward on Form 8582. After strict documentation, he qualified for 2025, but I cannot get ProSeries to unlock the previous losses even though I have the correct boxes checked. A question to AI suggested there was a checkbox for IRC 469 (c) (7) on the 1040/1040SR worksheet, but I cannot find it for the life of me. Any help would be greatly appreciated. Thanks.

ProSeries Professional

Best answer by ljr

I'm not sure either - does the prior losses stay as a carryover as there were passive in those years. I don't think it release because they switched or qualified - wouldn't it be for current year going forward - the losses would release on sale of property or against other passives?

abctax55

Level 15

Does AI confirm that the prior losses should be released?

HumanKind... Be Both

V

vezna31Author

Level 3

That wasn't my question to the AI. My question to the AI was how to unlock but I cannot find the checkbox on the 1040/1040SR worksheet that it is talking about. How would the AI know that answer anyway? I am going by the taxpayer's documentation, not what AI says. Not a very helpful contribution by you.

abctax55

Level 15

H, so, so sorry then... good luck with your research.

HumanKind... Be Both

Just-Lisa-Now-

Intuit Community Champion

I honestly dont know if what youre trying to do is correct, but the checkbox youre looking for is here

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

ljrAnswer

Level 9

I'm not sure either - does the prior losses stay as a carryover as there were passive in those years. I don't think it release because they switched or qualified - wouldn't it be for current year going forward - the losses would release on sale of property or against other passives?

IRonMaN

Level 15

I have heard that Al has a drinking problem and he doesn't always give accurate answers.

Slava Ukraini!

F

Frustrated-in-IL

Level 8

That is because AI is drinking the wrong stuff.

IRonMaN

Level 15

Al doesn't live in Illinois and Fireball is hard to find outside of the state. I hear they can't keep production up high enough to meet the demand in Illinois.

Slava Ukraini!

Accountant-Man

Level 13

I used to do a lot of work in passive loss rules (since 1987) and even prepared an 8 hour seminar on it for the firm where I worked. I know rules have changed, but I am guessing that prior years' passive loss carryovers do NOT become REP losses in a year that the REP qualifies.

Emphasis on guessing. I googled this: "do prior year passive losses become real estate professional losses?" The response is:

AI Overview

No, prior year passive losses (PALs) do not automatically become non-passive simply by qualifying as a real estate professional (REP). While REP status allows current-year rental losses to become active, suspended losses from prior years remain passive and can generally only be offset by future passive income or upon the final disposition of the property.

Key Details Regarding Prior Year Passive Losses:

Status Does Not Change: Prior year suspended losses remain classified as passive, even if you qualify as a REP in the current year.
How to Use Old Losses: These losses can only be used to offset current passive income or when you sell your entire interest in the property to an unrelated party.
Annual Qualification: Real estate professional status is not retroactive; you must meet the 750-hour and 50% tests annually.
Exceptions: The only way to "unlock" these losses is to trigger a "former passive activity" rule upon disposal of the property or by generating enough passive income in future years.
While the new, current-year losses may be active, the old losses remain "trapped" until the property is sold.

** I'm still a champion... of the world! Even without The Lounge.

Just-Lisa-Now-

Intuit Community Champion

I guess not all AI is created equal.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

IRonMaN

Level 15

Well, there is Al and then there is his other brother Al.

Slava Ukraini!

abctax55

Level 15

MY (unappreciated) answer was an attempt to 'teach the OP to fish' to find out if triggering those losses was correct. I didn't think so, but didn't know definitely. And I was on the couch, watching a local kid (a kid I bought raffle tickets from when he was in high school) performing in the Olympics so I wasn't about to boot up my 'pooter 😉

Thanks to all you *nice/helpful* folks who took time to research for the OP, and provide the answer.

HumanKind... Be Both

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