Yes Turbo Tax will do these things automatically. First and foremost, be sure to indicate you rent out part of your home as JotikaT2 mentions in her previous post.
- After entering the information, you will reach a screen that says let us calculate your expense deductions for you. Here you can decide to enter the expenses from your own calculations or let Turbo Tax do it. Here you must make a choice and it is recommended you let Turbo Tax do the work.
- Next screen will ask you you what percentage of the house is the room that is rented out. The best way to determine this is to take the square footage of the room and divide it by the square footage of the house.
- After this, all expenses will be calculated according to the percentage included above.
- To claim the correct amount of depreciation, go to assets and depreciation in your summary page. Enter the information about the cost basis and most importantly, the date you put your rental room in service.
- What is important now is this when the program asks if you used this asset 100% for business, say no. Then it will ask you for a percentage, put in the percentage that you calculated in step 2. if you don't, the program will depreciate the entire house and this is not correct.
- A 4562 form will be generated if this is the first year the room has been rented. This intuit source lists the conditions when the form is required.
- In determining if these are treated as non-passive losses, I referenced this link regarding IRC section 280A. It mentions that Subsection (a) shall not apply to any item to the extent such item is allocable to a portion of the dwelling unit which is exclusively used on a regular basis. In this example, if the room is used exclusively as a rental room, then the deduction is allowed as a passive loss. Please review this under exceptions listed in the link.
- Hope this helps.
@isamom1982
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