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Level 4
posted Sep 27, 2021 12:17:29 PM

discrepancy in my Turbotax 2020 rental reporting calculation

Please advise why TurboTax is not allowing the total of my rental in 2020 to go negative despite the fact that my expenses are (much!) more than the rent received in 2020. 

 

This is particularly noteworthy because last year TurboTax allowed the 2019 total for the same rental property to go negative (specifically -$13). This is also  visible in the 2-year comparison at the end of the rental analysis for 2020. 

 

More specifically, I noticed that for 2020 TurboTax caps the expenses of this rental to the amount of rent income, and then also zeros out the property depreciation amount (despite calculating the property depreciation amount to be exactly the same like last year). 

 

 So, I assume that I am doing something wrong this year. 

 

Also, please note that this is about AirBnB rental income from my own residence. So, I understand that this passive activity loss, although not applicable for this year, may be applicable in the future. correct? 

0 19 2667
19 Replies
Level 15
Sep 27, 2021 12:25:17 PM

You may have done something wrong last year if you are renting out the home you also live in ... this is considered a "vacation" rental and as such the expenses cannot exceed the current year income.  Unallowed losses are carried forward.   

 

I highly recommend you seek local professional guidance,  contact TT support  or upgrade to one of the LIVE options to get one on one assistance.  

Level 4
Sep 28, 2021 2:51:12 AM

Thanks for the prompt response! let me clarify (as I may have confused you): 

 

I just want to make sure that (as you too state) "Unallowed losses are carried forward." For last year, I know that -$13 was carried forward, but for this year it shows zero. So, how can I check in TT that my loss is calculated correctly and will be carried forward"? 

 

otherwise, yes, I am aware that "expenses cannot exceed the current year income" (as you suggest). For example, last year the negative amount (specifically -$13)  did not reduce my income.  

 

Thanks again. 

 

Level 15
Sep 28, 2021 5:47:18 PM

If you told the program that you are renting below fair market rental value (most common when renting to family) then your deductible expenses are limited to the amount of rental income received, and carry over losses are not allowed. Any carry overs are just lost, permanently. This would include carry overs from previous years too.

So work it back through and confirm you answered the questions correctly concerning renting to family, and renting at FMRV. Additionally, if a vacation rental where you only rented out for a single short period during the year, the same may apply to that scenario also, depending on the specifics.

 

Level 15
Sep 28, 2021 7:29:14 PM


@Carl wrote:

If you told the program that you are renting below fair market rental value (most common when renting to family) then your deductible expenses are limited to the amount of rental income received...


Per Section 280A, every day the property is rented a below fair rental constitutes a day of personal use. 

 

As such, the only expenses that can potentially be deducted are mortgage interest, property taxes, and casualty losses (all on Schedule A).

Level 4
Sep 29, 2021 10:55:11 AM

Thanks a lot Carl! yes, i think this is it! 

 

So, how can I make sure that TT is not assuming that that I rent below FMRV?  

 

Because I only rented 1 bedroom in my house for the 4-5 weeks in 2020 I was traveling, I suppose TT thinks that my yearly rental income is below FMRV. 

 

For example, according to TT "Median Rent results" the for a 2 bedroom in my county the monthly is $3,477... but I am not sure for example, how TT knows how that my house is a 2 (vs 1) bedroom...

 

please advise! 

Level 15
Sep 29, 2021 11:19:27 AM


@LP1968 wrote:

Because I only rented 1 bedroom in my house.....


@LP1968 

 

Did you answer the questions (check the boxes) on the following screens in the Property Profile section of the program?

 

Level 4
Sep 29, 2021 12:26:35 PM

yes, both are checked... and they are also both same as in 2019, which was my first year of renting and in which TT had allowed passive activity loss carryover (of -$13), unlike in this tax return. 

 

what else can I check to make sure that TT does not think that my rental was below FMRV? 

 

Thanks again! 

 

Level 15
Sep 29, 2021 12:29:52 PM


@LP1968 wrote:

what else can I check to make sure that TT does not think that my rental was below FMRV? 


There is another checkbox on a subsequent screen that asks if, during the time the property was a rental, the property was always rented at a fair rental price.

Level 4
Sep 29, 2021 12:44:03 PM

that's the question I am missing! somehow, I do not get that question. How can I get into the question? 

 

should i look for it under "Property Profile" or "Rental Income" in the TT overview screen named "Review of your XXX Rental Summary"?

 

Thank you very much for replying again! 

Level 15
Sep 29, 2021 12:47:23 PM

@LP1968 

 

You will find the screen in Property Profile. 

 

You will first be asked whether the property was rented all year. 

Level 4
Sep 29, 2021 1:07:58 PM

Yes, I am asked "Was this property rented for all 2020" ... 

and I respond "No, this property was not..." and then...

I declare the number of "days rented at a fair market price" (which is 23), and the number of days of "personal use..." (which is 302, as the remaining 40 days the house was listed  for rent but vacant)... 

 

is this correct? ... if so, should TT allow my passive activity loss to go negative  and be carried over to next year (like in 2019) instead of capping it to zero? 

 

Thanks again!

Level 15
Sep 29, 2021 4:08:09 PM

is this correct?

No. As an example, if the property was converted from personal use to rental use on Dec 1st and remained a rental for the rest of the year, then:

Was this property rented all year?  YES

Days rented:  31

Days personal use: ZERO

What the property was used for while it was "not" classified as a rental does not count for anything what-so-ever. Now if I did use the property for any personal use between Dec 1st and Dec 31st, then my days rented and days of personal use *must* add up to 31 or less.

In the desktop version of the program, the small print does try to make that clear. For some, they interpret it correctly. Others just flat out don't read that small print at all.

 

Level 15
Sep 29, 2021 5:09:16 PM


@Carl wrote:

Was this property rented all year?  YES


The property was not rented all year. @LP1968 stated, "I only rented 1 bedroom in my house for the 4-5 weeks in 2020 I was traveling".

Level 15
Sep 29, 2021 6:16:12 PM

If the property was converted to rental in 2020, then converted back to personal use in that same tax year, then the only days that count for anything, is the days it was classified as a rental. Days it was not classified as a rental, count for nothing.

With the numbers being used, the OP is saying the property was classified as a rental for the entire 365 day year. If so, their numbers are correct. Otherwise, their numbers are wrong.

 

Level 15
Sep 29, 2021 6:31:14 PM

This could be a problem for TurboTax.

 

@LP1968 wrote (in a previous post) that there were 23 days of actual rental, 40 days where the bedroom was vacant but available for rent, and 302 days of personal use. 

 

Then, it appears as if only one bedroom in the house was rented (or available for rent).

Level 15
Sep 29, 2021 6:32:45 PM

This needs to be handled as a "vacation" rental in the Sch E section ... follow the screen instructions. 

Level 15
Sep 29, 2021 6:42:39 PM

So, how can I make sure that TT is not assuming that that I rent below FMRV?

The program does not make that assumption. There's a screen with a checkbox on it that you would actually have to check, in order to tell the program you rented below FMV.

You don't say the dates the property was classified as a rental. So let me pick some out of thin air that will equate to "4-6 weeks". I am aware it's only a room, and not the entire property.

On Apr 1 you convert the property (that one room as a percentage of your total floor space) from personal use to rental. Then on Jun 1 you convert the property back to personal use. That's 61 days. During that 61 days you never used the room/property for any personal use.  But you did rent it out for 40 days.

Days rented: 40

Days personal use. ZERO.

If there was any personal use between Apr 1 and Jun1, then with 40 days rented, the days of personal use can not possibly exceed 21 days. You are only counting the days the property was classified as a rental. Period.

 

Now most likely, you did not convert the room/property back to personal use. So that would mean the day count from Apr 1 to Dec 31 is 273. Your days rented would still be 40, and your days of personal use can not possibly exceed 233 (273-40).

If you did not convert the property/room back to personal use on your 2020 tax return, then technically speaking, the property/room is still a rental in 2021.

I say you probably did not convert the property back to personal use on your 2020 return, because it's a bit tricky to do that. I can be done. But it's not very intuitive in the program.

 

Level 15
Sep 29, 2021 6:43:13 PM


@Critter-3 wrote:

This needs to be handled as a "vacation" rental in the Sch E section ... follow the screen instructions. 


Yes, but @LP1968 wrote that only one bedroom in the home was rented.

Level 15
Sep 29, 2021 6:44:42 PM

@LP1968 follow the "vacation rental" information in this thread. Not the other stuff. It's just confusing you unfortunately, and I apologize for that.