Any rental loss carried forward from a year in which the Vacation Home Limitation was applicable to Federal Schedule E (Form 1040) Supplemental Income and Loss can only be used if there is sufficient rental income in that year to allow those losses.

Per IRS Publication 527 Residential Rental Property (Including Rental of Vacation Homes), page 19:

Limit on deductions. Renting a dwelling unit that is considered a home isn’t a passive activity. Instead, if your rental expenses are more than your rental income, some or all of the excess expenses can’t be used to offset income from other sources. The excess expenses that can’t be used to offset income from other sources are carried forward to the next year and treated as rental expenses for the same property. Any expenses carried forward to the next year will be subject to any limits that apply for that year. This limitation will apply to expenses carried forward to another year even if you don’t use the property as your home for that subsequent year.

To figure your deductible rental expenses for this year and any carryover to next year, use Worksheet 5-1.

Worksheet 5-1 is included in the TaxAct program and will be populated based on your entries. The worksheet also calculates and tracks the amount of Operating Expenses and Depreciation allowed to be carried over to the following year's return due to this calculation.

To view the Vacation Home Limitation Worksheet in the TaxAct program, go to our Schedule E - Vacation Home Limitation Worksheet View Worksheet FAQ.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the webpage or document at the time it is accessed.