Do I Have to File Form 8582?
Form 8582, titled "Passive Activity Loss Limitations," is used by noncorporate taxpayers to calculate and report passive activity losses (PALs) and how they can be applied against other income. Whether you must file this form depends on your tax situation and income level.
Who Must File Form 8582?
You generally must file Form 8582 if you have passive activity deductions, including prior-year unallowed losses. However, you are exempt from filing if you meet all of the following conditions:
- You have no current or prior-year unallowed credits from a passive activity.
- Your modified adjusted gross income (MAGI) is $100,000 or less ($50,000 if married filing separately).
- You do not hold any interest in a rental real estate activity as a limited partner or as a beneficiary of an estate or trust.
When Is Form 8582 Required?
Form 8582 is typically required when you have an overall gain from business or rental passive activities, including any prior-year unallowed losses. In such cases, you must report the gains and losses on the appropriate forms (such as Form 4797 or Form 8949) and mark them with identifiers like “FPA” or “EDPA” as instructed.
Reporting Gains and Losses
If you have an overall gain from a passive activity, you must report all income and losses on the forms normally used (e.g., Schedule E, Form 4797, Form 8949). You should enter “EDPA” to the left of the entry space to indicate that the gain is from an entire disposition of a passive activity.
Special Cases
- Former Passive Activity: If you have an overall gain and the activity was previously passive, you report all income and losses on the normal forms and do not use Form 8582.
- Prior-Year Unallowed Losses: If you have prior-year unallowed losses, they must be reported on Form 8582 if you have an overall gain in the current year.
How to Complete Form 8582
Form 8582 includes several parts to calculate your allowable passive losses. You must consider only passive income and deductions when calculating net income or loss. The form also requires you to account for modified adjusted gross income (MAGI) when determining allowable deductions.
For example, if your MAGI is $92,000 and you have $5,500 in taxable social security benefits, your MAGI for Form 8582 purposes is $86,500 ($92,000 - $5,500).
Additional Notes
- Form 8582 must be filed with your federal tax return for the year in which you have passive activity deductions.
- If you regroup activities, you must attach a written statement with your return explaining the regrouping and providing details of the activities involved.
Source:
Instructions for Form 8582
Disclaimer: Always verify details with official Federal or State Department of Revenue Forms and Instructions.