I rent a room in my own home. I bought the house in September 2020 and my expenses for that room/portion of the house are higher than my passive income/rent mainly because I had some repairs and it was rented for 3 months only. However, TurboTax does not appear to properly deal with losses when renting a room in your own home and let me offset my active income/wages with my passive income. The software is allowing me to claim a loss from my rental activity (room in house), to reduce my active income/wages using the losses, which does not seem to meet IRC section 280A(c)(5) , which precludes deduction for loss when renting a room in house.
The software should allocate losses in sequence with first portion of mortgage interest and property taxes; second, allocated amounts of indirect expenses other than depreciation (but only to the extent of remaining income); and last, allowable depreciation and should allow the excess to be carried forward for next year, but it does not seem it is working like that at this point and all the losses are offsetting wages.
