Cannot figure out how TurboTax is allocating expenses for new Airbnb rental

[bentley311]

Hello,

We started renting out a portion of our home/property on Airbnb in August of 2021. When on the "Tell us about your situation this year" screen, it is not clear what to select. I have selected "First year rented" and "Rented part of your home" but I am not sure if I also need to select "Converted home to rental or rental to home." The larger issue is that the software does not seem to ever ask what the size of the rental space is relative to the rest of the home so I cannot figure out how it is allocating expenses. Is there a bug in the software because I keep finding indications in prior versions of this being something to be prompted for, much like the home office?

[AnnetteB6]

If you are only renting part of your home, then you need to check the boxes for 'first year rented' and 'renting part of my home'.  You should also check the box regarding converting from personal to rental use.  

Note that when you are asked about the fair rental days and personal use days that the question is referring to the portion of your home that you are renting only.  You would only have personal use days if you used that space when it is not rented.  Days prior to starting to advertise it as a rental do not count as personal use days because the rental did not exist yet.  

With the box checked to show that you rented only a portion of your home, there should be a question that asks you to allow TurboTax to calculate the expense deductions for you.  If you choose 'yes', then that is where you will enter the percentage of your home that is being rented.  

If you choose to do the math and only enter the expenses related to the rental, then you will not see a question about the percentage being rented.  

Keep in mind that you will need to prorate the expenses you enter by the number of months that you had the rental.  TurboTax will not do that math for you.  For example, suppose you paid $1200 for property tax for the year and you are renting 10% of your home.  If your rental started on August 1st, then you would enter $500 for the property tax amount as a rental expense if you are allowing TurboTax to do the math for you.  This would mean that $50 of property tax is reported on Schedule E and $450 would be carried to Schedule A.  The other $700 would need to be entered on Schedule A by you.  

If you choose to do all the math yourself, then simply enter $50 for the property tax amount reported on Schedule E (five months of tax prorated by 10% of the property being rented).  

[bentley311]

Thank you for the response! I unfortunately do not get prompted for the use percentage. It alludes to it, but never prompts me for it which is why I am confused by it. I get this as a last prompt after indicating rental days:

Do you have an office in AirBnb?

In addition to renting out part of your home, do you have an office in your home?

Yes, I have an office I use for business

Got it. Later we'll ask you for your income and expenses. Enter only the percentage for the area you rented out.

[ColeenD3]

Your home office would be in the personal section of your home, not the area you rent out, I would think. 

You would select the 4th option shown in the screenshot.

[bentley311]

I selected the 1st, 2nd, and 4th options. As far as the home office, the software asks me if the home also has a home office which is why I have that selected.

If I understand their question, they are asking if I have an office in my home, not in the rented space specifically.

"In addition to renting out part of your home, do you have an office in your home?

Yes, I have an office I use for business"

[AnnetteB6]

That is correct, it is asking if you have an office in another part of your home rather than as part of the rented portion of your home.  

Because there is an office in the home as well as a rental in part of the home, you will not see the option to allow TurboTax to do part of the math for you based on the square feet of the rental space.  You will have to do all the prorating and allocations yourself and only enter the expenses pertaining to just the rental space.  

This is due in part to the home office information being entered in the Schedule C section of your return and both areas using some of the same expenses but prorated by the area of the home used for the different business purposes and the time it was used as well.

@bentley311