Do i need to prorate deductions on a rental property I converted mid year?

[atimeforsam]

I started renting my condo in April.  I'm wondering if I should deduct the entire year's property tax, depreciation, condo insurance, or if I just enter the entire year's value of these things.  Thanks!

[ChelsiE2 · Accepted solution]

Yes, you should prorate the amounts between Schedule A (for the time you lived there) and Schedule E (for the time you rented it out).  

When you enter the date that condo became a rental in TurboTax, the depreciation will be automatically calculated only for the time you rented it.

For all other expenses, you can prorate as follows:

Example: Let's say that you lived in your home Jan 1 - Mar 31 (3 months) and rented it Apr 1 - Dec 31 (9 months).  Let's also say that you had Mortgage Interest of $5,000, Real Estate Taxes of $2,000 and Home Owners Insurance of $500.  These costs would be allocated as follows: 

• Schedule A: 
• Mortgage Interest = (3 / 12) x $5,000 = $1,250
• Real Estate Taxes = (3 / 12) x $2,000 = $500
• Home Owners Insurance = $0 (not deductible for personal use property)
• Schedule E: 
• Mortgage Interest = (9 / 12) x $5,000 = $3,750
• Real Estate Taxes = (9 / 12) x $2,000 = $1,500
• Home Owners Insurance = (9 / 12) x $500 = $375

Please note: for the time you lived there, you'd only be able to deduct the applicable Mortgage Interest and Real Estate Taxes.  You would not be able to deduct that portion of depreciation or condo insurance.

[jeff-issenberg]

Re "When you enter the date that condo became a rental in TurboTax, the depreciation will be automatically calculated only for the time you rented it." I don't see TT prorating the Mortgage Interest or the Real Estate Taxes on my Schedule E. I entered the full amount and I see the full amount on Schedule E. Is there somewhere on Schedule E that it is prorating and I just don't see it? Or do I need to do the protrating of the Real Estate Taxes myself when I enter on the Enter Common Expenses TT page. On the Report Mortgage Interest TT page it says "Enter the rental portion of mortgage interest reported to you on Form 1098. We'll ask you to enter your personal portion later."

[ChelsiE2]

@jeff.issenberg As you noted, TurboTax automatically calculates the depreciation.  You should do your own calculation for mortgage interest expense and property taxes and divide them yourself between Schedule E and Schedule A.

[jonchan831]

is this still the case for this years version, or does turbo tax prorate it now.  I am getting conflicting answers on this website

[jeff-issenberg1]

I need to split my Mortgage Interest, Real Estate Taxes and Home Owners Insurance for renting my home for part of the year again this year. I was able to enter an amount directly in line 10 Home mortgage interest in Schedule A and things recalculated. But I'm unable to reduce/edit the total of the Mortgage interest qualified in line 12a on the Schedule E Wks. Clicking in the field makes the + to the left of the field appear and in the pop up window I can enter a description and an amount but the amount doesn't update the value on the Schedule E Wks. Where in TT Step by Step or in the Forms can I make this edit? We received a few 1098 forms for paying off mortgages with a refinance. Should I change the amounts on each of those in the Report Mortgage Interest page to the Rental Use Percentage of the actual amount?

[gene20]

I understand how to prorate the amount, but how to enter it? I am using desktop version and in "Home loan deduction summary" page and should I just enter the prorated the amount or the exact amount from 1098? Also since I rented out my previous home and moved to a new home I bought, should I put both homes as primary residency?

[Critter-3]

My personal preference is to do the prorations manually and enter the rental portion  in the Sch E area  and the personal portion in the Sch A area  but you can let the program  do the math for you if you answer the use questions correctly.   Review the return carefully prior to filing to make sure the proper amounts are in the correct places. 

[Carl]

While you have the option to "let TurboTax do it for you", I don't recommend it. That's because there are some things that can't be prorated correctly or at all by the program.

For your typical rental expenses such as repairs, maint, advertising, etc, you only enter costs incurred after converting it to a rental. Now while the program will prorate the property taxes and mortgage insurance, it seems to have difficulty with the property insurance. That's because property insurance is not a SCH A itemized deduction and never has been. So you pro-rate the property insurance for the rental time only.