Converting a property from Primary to Rental

[crystalPP]

Need help as it is the first year being a landlord.

From Jan to May, we lived there as primary, then we bought another house and rent out the old one from July-Dec. 

I understand that we should split the mortgage interest/insurance premium/property tax to different sessions. 

I completed the "rental income" --> "common expenses", and I also adjusted the "real estate tax" and "insurance" -- the total amount divided by 12 and times 7 (from June-Dec). 

However, when I go to the "deductions/credits" and enter for the same 1098 as my primary house (I adjusted the amount as well and checked the box " it is a different amount than 1098). My tax obligation jumped a lot. There is a message like below. Where did I go wrong? Why I owe more after I input the interest information? Thank you very much!

[HopeS]

You are on the right track, the best option is to manually prorate the amount for the Mortgage and Property Tax and enter the amounts directly to the Schedule E Rental Income and Schedule A for the Itemized Deduction.

Since Form 1098 will not reflect correctly on Schedule A, when completing the Mortgage interest section in Sch A, bypass the question regarding Form 1098 and enter the amount of prorated interest in the section that

shows "Let's get the detail from your Form 1098. You will click on the Box "The interest amount I entered is different than what's on my Form 1098. See  screenshot below.

Enter the SCH E expenses as direct expenses as follows:

1. login to your TurboTax Account 
2. Click on "Search" on the top right and type “rentals”
3. Click on “Jump to rentals”
4. Continue until the “Tell us about your situation this year” screen and select “Converted home to rental or rental to home”
5. Continue through the questions
6. When you are working on your assets (house) on the “Tell Us More About This Rental Asset” screen select “The item was sold, retired, stolen,… converted to personal use,….” and you can enter the day you converted the property to a rental

It is important that you keep a record of your calculation and Form 1098 in case you have to produce these documents to the IRS.

See the link below which might also be helpful.

Conversion 

@crystalPP 

[crystalPP]

Thank you.

I am using a turbotax premier PC downloaded version.

I did complete all the questionnaires in the rental income session. I answered questions like when I started to converted the house.

It's just for the "deductions/credits" part, there is a reminding message saying that certain deductions have being taken care of. But I am now dealing with the primary residence part, that should not be covered when I enter for the rental information. After I added that 1098 (the old house), the tax owed jumped, which doesn't make sense. I don't know where did it go wrong. Or shall I input the year-total amount of property taxes/insurance premiums/mortgage interests in the rental session, then Turbotax automatically calculate the rental deduction and primary deduction because it collects information like when I converted the house?

[crystalPP]

I found this when I input the 1098 form under the rental income session.

So it looks like TurboTax will allocate for the personal portion automatically? And I don't need to input this 1098 again for the same property??

[PatriciaV]

Yes, you are correct. Enter the entire amount from Form 1098 under your Rental Expenses. Based on the percentage of personal use (time before conversion), TurboTax will calculate the amount to report for your Itemized Deductions.

[Carl]

When you elect to have the program do the splits for you, you enter the total amount of interest reported on the 1098, in the SCH E section and the program (not you) does the split for you, based on your in service date.

Under the deductions and credits tab where you're asked to enter the mortgage interest, read the small print on that screen. If you elected to have the program do the split for you, then the small print will tell you how much of the total you entered on the SCH E, is already being included on the SCH A.You only enter the 1098 one time.