@Carl wrote:
When you indicate that you are renting below FMV you still enter all of your rental expenses, even if they exceed the rental income. The program (I think) will only deduct the amount of expenses up to the rental income received, and the excess expense is not carried over. It's just lost forever.
That would be wrong if the program, in fact, handles the scenario described in that manner.
It does not do so, however, because it asks for the number of fair rental days and the number of personal use days. If those fields are entered accurately by the user (e.g., no fair rental days), the program will kick it out of Schedule E treatment.
Regardless of how this scenario is handled by TurboTax, the Code (Section 280A) mandates that each day rented at below fair rental value is considered to be a day of personal use (that means the owner is limited to Schedule A treatment for mortgage interest and property taxes and can deduct none of the typical rental expenses).
