First Year Rental, TurboTax is not letting me overwrite rental expense.

[Curious_panda1]

Hello,

I lived in my primary residence from January 1, 2024, to March 31, 2024, and then rented it out for the remainder of 2024. TurboTax is trying to be "helpful" by prorating all my rental expenses. While prorating is appropriate for real estate taxes and insurance, I don’t believe it should apply to certain repairs and supplies.

For example, I purchased a dehumidifier specifically for my renters at their request. I have kept detailed records of supplies, utilities, and repair expenses incurred after my renters moved in. How can I ask TurboTax not to prorate these expenses and allow me to manually enter them as full rental expenses?

Additionally, TurboTax seems to cap my rental expenses to match my rental income, preventing my rental deductions from exceeding my rental income. From my understanding, rental deductions should be able to exceed rental income, with the excess carried forward as a passive loss.

However, I also own another rental property that was rented for the entire year of 2024 and had a net loss, which TurboTax correctly displays as a negative amount. Can someone explain why TurboTax is treating my partial-year rental differently and not showing a loss carry forward?

Separate Question on Depreciation:

I installed new windows, flooring, and a washer/dryer in August 2023, nine months before renting out my property. Can I depreciate these improvements, even though they were made before the rental period? If so, how should they be classified in TurboTax?

[DianeW777]

The key is that you rented the property 100% after you converted it from a personal residence to a rental property. There is no 'multi' use after the conversion. You should prorate  your real estate taxes, insurance and mortgage interest yourself. Follow the steps below so that all direct rental activity expenses are used at 100%. 

Here are the steps to get to that section so that you can enter your expenses that are 100% for the rental activity (no personal expense portion).

1. Open your return in TurboTax Online/Mobile or TurboTax Desktop
2. Search (upper right) Type rentals > Click the Jump to.. link
3. Select Edit beside Rental Property Info > Select Edit under Situations  > Continue
4. Select Converted home to rental or rental to home > Continue > Select From primary residence to rental > Continue
5. Select the same on the next screen > Select 'Yes' property was rented all year - You will break down any expenses that do not pertain to the rental period.
6. Select 'Yes' it was always rented at fair rental value (FRV) > Continue
7. Enter your expenses yourself and they should be at the amount you entered

Likewise the rental house will be added as an asset (must have a separate land value) and you will enter the date it was placed in service. TurboTax will handle the correct depreciation. Enter any additional assets for your rental activity.