Does Turbotax automatically divide mortgage interests and property tax for primary home to rental conversion?

[nestlen]

I lived in my primary home for the first 7 months then converted it to rental property for the rest in 2022.

Is it. correct to enter full amount of mortgage interests and property tax for both primary home deduction and rental property expenses?

Does turbotax automatically divide the portion based on the days I provided in rental property income section?

[Carl]

If (and only *if*) you select the option for the program to divide the expenses for you, the program will split the mortgage interest and property taxes between SCH A for the period of time it was personal use, and SCH E for the period of time it was classified as a rental. It will not split anything else. So you will have to manually pro-rate the property insurance yourself for the SCH E. All other expenses are not split, and should not be split. Either the expense was incurred while the property was classified as a rental making it 1005 deductible, or it was not.

[nestlen]

How can I confirm if I choose the option to divide or not? I went through it again but didn't see any checkbox. It looks like it automatically divided mortgages interests and property tax for me. 

Also in rental property tax section there is a <property tax paid> section, if turbotax dividedes property tax for me I assume I don't need to fill that section at all?

[DaveF1006 · Accepted solution]

Yes, Turbo Tax will automatically prorate the amount of mortgage and property tax to the rental as well as personal residence. 

1. First you will enter in the rental information. As you complete this section, there will be a selection that you make indicating that this was a personal residence that became a rental.
2. There will also be s section that you will allocate your personal days and rental days. This ratio will be used to determine the amount of business and personal expenses to be allocated on your return.
3. After you record your rental income, you will enter the full amount of all expenses incurred during the year on the property.
4. After everything is entered, the prorated amount for mortgage interest and property taxes will appear in Schedule E of your return.
5. The remainder of the mortgage interest and property will appear in Schedule A of your return, providing if you have enough deductions to generate a Schedule A. 

@nestlen

[AmeliesUncle · Accepted solution]

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@DaveF1006 wrote:

Yes, Turbo Tax will automatically prorate the amount of mortgage and property tax to the rental as well as personal residence. 

1. First you will enter in the rental information. As you complete this section, there will be a selection that you make indicating that this was a personal residence that became a rental.
2. There will also be s section that you will allocate your personal days and rental days. This ratio will be used to determine the amount of business and personal expenses to be allocated on your return.
3. After you record your rental income, you will enter the full amount of all expenses incurred during the year on the property.
4. After everything is entered, the prorated amount for mortgage interest and property taxes will appear in Schedule E of your return.
5. The remainder of the mortgage interest and property will appear in Schedule A of your return, providing if you have enough deductions to generate a Schedule A. 

@nestlen

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No, don't do that.   As the screen on TurboTax shows (although it is a bit hard to understand), you only enter personal days AFTER it was converted to a rental.  So assuming there were no personal days after you started renting it, you enter ZERO personal days.  And then you need to MANUALLY prorate the amounts.

Incorrectly entering personal days can mess some things up, including how the Passive Loss rules are applied.

[nestlen]

Thank you! I believe you are right after checking the note in Turbotax... so come back to the original question, Turbotax actually doesn't divide mortgage interests and property tax (or doesn't do it the right way we expected)?  Or does it assume the mortgage interests and property tax amount we entered in the rental refer to amount after it's converted to rental? this is so confusing.

[AmeliesUncle]

It has been several years since I looked at how TurboTax does things, but the last I checked TurboTax had no way of splitting it, so it had to be done manually.