I have seen different answers to this question, the only thing that is consistent is that TurboTax does not seem to know how to handle this right. I believe I have found the solution, but perhaps someone could confirm what I have gleaned from other answers to similar questions?
I have a rental property and my property manager has sent me a 1099-MISC with most of the rental income in box one, but a small amount (less than $2k) in Box 3 as "Other Income." This reflects amounts taken from deposits to pay for damages and cleaning after a tenant has moved out. They say they have always done it this way. They tell me it counts as income, even though the full amount went towards damages and cleaning. In other words, there was no actual income.
TurboTax does not want to calculate this as rental income, and wants to create a new entry in my Schedule C and count this as self-employment income. This creates a tax liability for me!
From what I have read in other answers here on the Intuit site, it looks like I am supposed to deduct the amount received in Box 3 from my rental expenses, and remove the amount from the section for "Self Employment Income." But this has not been clearly stated as such. Can someone confirm this?
