Investors & landlords

I am a single mom working full time. On the side I have rented out my condo (I’m not living there)

This indicates to me that rental income is not your primary source of income. It can't be if you are already working a full time job (or two, as a single mom).

I just created a DBA and got an EIN number. I was told creating DBA will let me take deductions like car, computer, gas, maintenance of property etc.

Don't know who told you that. But assuming you are the sole owner of the property, you were told wrong.

I was wondering if I need a business account or get rent paid to DBA for deductions and to look like a legit business?

Short answer is no. I'll expand on that later.

Also should I put this DBA business name in my living trust?

No. In fact, there's no reason a "dba" needs to exist in your specific and explicit situation as I understand it.

Or put my rental condo in the DBA name?

Short answer, no.

Sorry newbie at this

Please don't apologize. It's not like you learn this stuff through osmosis. You gotta start somewhere, and for just about everybody, that starting point is at the bottom.

-trying to figure best way. Thanks in advance for your help.

Assuming that 2022 is your first year dealing with this, I would "HIGHLY" recommend you purchase the CD/Desktop version of TurboTax that you physically install on your Windows or MAC computer. Even if you've used TurboTax in the past, if this will be your first time dealing with rental property, the CD/Desktop version of the program is significantly more user friendly and much more versatile and flexible than the online version of TurboTax could ever hope to be.  For example, with the CD version it defaults to "interview mode" where it asks questions, you provide answers, select check boxes, etc. and the program creates tax forms as needed.  It also gives you the option to switch to "forms mode" where you can see the forms and "follow the math" when you have questions about why certain totals are what they are.  With the online version, forms mode is not an option.  Additionally, with the CD/Desktop version starting over is a peice of cake. You simply delete the tax file on your computer, restart the program and it's "as if" you just install the program and are using it for the very first time.

With the online version, you can't see the actual forms until "after" you pay your filing fees for the program. But that can put you in a catch-22 situation because once you've paid for the online program, clearing the return and starting over from scratch is not an option.

Now, I'm going to stop here to get more information from you, so I don't waste time providing information that does not apply to your explicit and specific situation.

- Did you use the online version of TurboTax to complete and file your 2021 tax return? Or did you use the CD/Version? Maybe you didn't use TurboTax at all and 2022 will be your fist time using TurboTax tax?

- Were you living in the condo as your primary residence at any time since you owned it? If yes, on what date did you move out? Also, on what date did you decide to rent it out and actively start advertising it for rent? Maybe you haven't actually done that yet?

I'll probably have more questions. But hey, tax filing season for 2021 is over and for 2022 we still have plenty of time. So I'm more than willing to take the time to walk you through the learning process so you don't learn things the way I did, which resulted in me paying my fair share of what I call "stupid tax" to the IRS.

Meanwhile, print the below and keep it for reference. It will definitely come in handy for you during the learning process, as well as the first time you are dealing with this on your taxes.

Rental Property Dates & Numbers That Matter.

Date of Conversion - If this was your primary residence or 2^nd home before, then this date is the day AFTER you moved out, or the date you decided to lease the property – whichever is later.
In Service Date - This is the date a renter "could" have moved in. Usually, this date is the day you put the FOR RENT sign in the front yard.
Number of days Rented - the day count for this starts from the first day a renter was contracted to move in, and/or "could" have moved in. That would be your "in service" date or after if you were asked for that. Vacant periods between renters do not count for actual days rented. Please see IRS Publication927 page 17 at https://www.irs.gov/pub/irs-pdf/p527.pdf#en_US_2020_publink1000219175 Read the “Example” in the third column.
Days of Personal Use - This number will be a big fat ZERO. Read the screen. It's asking for the number of days you lived in the property AFTER you converted it to a rental. I seriously doubt (though it is possible) that you lived in the house (or space, if renting a part of your home) as your primary residence, 2nd home, or any other personal use reasons after you converted it to a rental.
Business Use Percentage. 100%. I'll put that in words so there's no doubt I didn't make a typo here. One Hundred Percent. After you converted this property or space to rental use, it was one hundred percent business use. What you used it for prior to the date of conversion doesn't count.

RENTAL PROPERTY ASSETS, MAINTENANCE/CLEANING/REPAIRS DEFINED

Property Improvement.

Property improvements are expenses you incur that Improve, restore, or otherwise “better” the property. Basically, they retain or add value to the property.

Betterments:
Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property. An example of a pre-existing condition or defect in this context would be something such as foundation repair (slab jacking) or some other, hidden and costly, anomaly.
Restoration:
Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition.
Adaptation:
Expenses that may be for adaptation include expenses for altering your property to a use that isn’t consistent with the intended ordinary use of your property when you began renting the property. Adding a wheelchair ramp would be an example.

Expenses for these types of costs are entered in the Assets/Depreciation section and depreciated over time. Property improvements can be done at any time after your initial purchase of the property. It does not matter if it was your residence or a rental at the time of the improvement. It still adds value to the property.

To be classified as a property improvement, two criteria need to be met:

1) The improvement must become "a material part of" the property. For example, remodeling the bathroom, new cabinets or appliances in the kitchen. New carpet. Replacing that old Central Air unit.

2) The improvement must retain or add "real" value to the property. In other words, when the property is appraised by a qualified, certified, licensed property appraiser, he will appraise it at a higher value, than he would have without the improvements.

There are rules that allow you to just flat-out expense and deduct some property improvements instead of capitalizing and depreciating them, if the total cost of the improvement was less than $2,500. It’s referred to as “safe harbor di-minimis” But depending on the specific situation, this may or may not be beneficial. Just be aware that not every property improvement that cost less than $2,500 qualifies for this. If this interest you, the rules can get complex. So a good place to start reading is on the IRS website at https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations. The stuff on di-minimis starts about one page down.

Cleaning & Maintenance

Those expenses incurred to maintain the rental property and its assets in the usable condition the property and/or asset was designed and intended for. Routine cleaning and maintenance expenses are only deductible if they are incurred while the property is classified as a rental. Cleaning and maintenance expenses incurred in the process of preparing the property for rent for the very first time are not deductible.

Repair

Those expenses incurred to return the property or its assets to the same usable condition they were in, prior to the event that caused the property or asset to be unusable. Repair expenses incurred are only deductible if incurred while the property is classified as a rental. Repair costs incurred in the process of preparing the property for rent for the very first time are not deductible.

Additional clarifications: Painting a room does not qualify as a property improvement. While the paint does become “a material part of” the property, from the perspective of a property appraiser, it doesn’t add “real value” to the property.

However, when you do something like convert the garage into a 3^rd bedroom for example, making a 2-bedroom house into a 3-bedroom house adds “real value”. Of course, when you convert the garage to a bedroom, you’re going to paint it. But you will include the cost of painting as a part of the property improvement – not an expense separate from it.