The client has $60,000 in wages, all of which are excluded under the Foreign Earned Income Exclusion on the 2024 return. The passive activity loss carryover from Form 8582 from rental property on the 2023 return is creating a Net Operating Loss (NOL) on the 2024 return in Pro Series software. Since the taxpayer actively participated in the rental property in 2023, there is a $25,000 passive activity loss carryover. My understanding is that an NOL should not apply in this situation.

Is it appropriate to uncheck the “taxpayer actively participates in rental property” box in Pro Series on 2024 tax return to remove the NOL or is there another way to eliminate the NOL in the software without unchecking that box. Please advise.