Do I allocate mortgage interest and property taxes btwn Schedules A and E, or does Turbotax do that for me? (ie do I enter all of my interest from 1098 in Real Estate sec

aking4567 · ‎May 31, 2019

I rented out my house for about half of the year. I've calculated the portion of my mortgage interest and property taxes that I paid while living in my house, vs. renting it out. Do I enter just the amount of interest and taxes I paid while renting out the house int he Real Estate section, and enter the other amount (of interest and taxes I paid while living in the house) in the Deductions section? Or should I enter the total amount of interest and taxes in Real Estate (ie does Turbo Tax take that entire amount and then allocate it for me, based on the number of days I reported renting vs. living in it?) the standard answer that is given online is completely unclear on this point. Thank you.

DianeW · ‎May 31, 2019

With the expenses already calculated by you, best advice is to enter them separately as you indicated, the rental portion in that section and the personal portion under the deductions section.

The key is to answer the questions appropriately in the rental activity under the situations that apply to the property so that you are taking advantage of all the appropriate expenses.

If you choose to enter the expenses in each section yourself DO NOT select a box under "Converted" section. (Recommended because you have already split out the expenses)

Select "yes" it was rented all year
Enter the start date as the actual rental use date (in the asset section for the house)

If you want TurboTax to split the expenses for you, enter them all under the rental activity by selecting the "Converted" box for I converted this property from personal use to a rental in 2016.

Select "no" it was not rental all year
Enter personal use and rental use number of days
Enter the start date as the actual renal use date (in the asset section for the house)

In your TurboTax Premier account follow these steps.

Sign into your account and go to the tax return.
Select My Account in the upper right > Select Tools > Then Topic Search >
Seach for rental > Go (image attached)
Continue to edit or update the property
Select Property Profile go to the screen asking about the situations - review
Select any that apply or "None of the above"
Continue - the next screen select "Yes or No" this property was rented all year based on your choice above.
Click the screenshots attached to enlarge and view for assistance.

If you choose one above - enter your personal deductions using the steps below.

You can go directly to itemized deductions by following these steps:

1. Sign into your account and select your current return

2. Select My Account in the top Right

3. Select Tools

4. Select Topic Search (see attached image)

5. Search for itemized deductions and select Go

This will take you to the interview process for your mortgage interest and property tax deductions for personal use.

View solution in original post

ran2-chen · ‎March 16, 2021

What if the property is a detached guest house on your residential property. Shouldn't the mortgage interest expense be only be a percentage of the total property square footage AND further reduced to reflect that it was rent ready three months after I bought the home and for a total of only 45 days? I don't see that TT offers an auto-allocation to take these kinds of factors into account. I wonder if selecting a different situation (single family home vs converted vs short term rental) matters for auto-allocation or if I should be manually allocating to reflect proper proportions for rental expenses and personal deductions.

Cynthiad66 · ‎March 16, 2021

You should determine the separate guest house basis from the total cost of the property. Allocate that as the basis for depreciation of the building itself. Since this is sort of a totally separate structture, you should compute the percentage for mortgage interest and property taxes to split between Schedule E, Rental and Schedule A itemized deductions.

Is this a short term, Air B-n-B type rental, then you have separate rules for those tpes of rentals

Generally, landlords filing 1040 or 1040-SR returns will report their rental income and expenses on IRS Schedule E: Supplemental Income and Loss.

However, if you provide "substantial services" to your tenants or your real estate business generates rental income, use Schedule C: Profit or Loss from Business. The same holds true for properties considered short-term rentals, i.e. properties with an average per-tenant rental period of less than 7 days.

Properties rented through a corporation or partnership (including LLCs taxed as such) report rent-related income and expenses on the business's return.

How can I tell if I'm providing "substantial services" to my renters?

Substantial services go above and beyond the basic services typically provided to renters (utilities, maintenance, landscaping, trash collection, etc.). If you’re providing hotel-like perks such as regular cleaning or maid service (in excess of 10% of the rental cost), fresh linens or towels, in-room coffee, transportation, or sight-seeing, you’re providing substantial services, and that means you'd file Schedule C.. See link for more information.

Should I Report My Rental on Schedule E or Schedule C

Please use this IRS Pub for additional information about Residential Rental

Residential Rental Publication

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Do I allocate mortgage interest and property taxes btwn Schedules A and E, or does Turbotax do that for me? (ie do I enter all of my interest from 1098 in Real Estate sec

Deductions & credits

Deductions & credits

Deductions & credits