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Hello, When i Enter expenses for my rental business my tax liability is going up? Is there a glitch in the system?

 
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Hello, When i Enter expenses for my rental business my tax liability is going up? Is there a glitch in the system?

It's hared to say without seeing your return, but one probable reason is that some income-based credits such as the earned income credit will decrease when you enter more rental expenses and decrease your taxable income.

 

Please note that the law requires you to deduct all allowable expenses and not leave out some to increase your income-based credits.

 

Another area that is affected by the amount of income on your rental property is the Qualified Business Income Deduction (QBI). The Qualified Business Income Deduction takes the qualified income and multiplies the amount by 30%. 

 

As your Rental Income decreases with the additional expenses, the QBI is decreased. As the QBI is decreased your taxable income and income tax amount will increase. The greater the taxes the lower the refund.

 

You can go to forms and look at your 1040 and Schedules 1, 2, and 3 to see what changes when more rental expenses are added.

 

Even on the Online product, you can see your 1040 and its schedules at any time by clicking on Tax Tools (on the left), then Tools (below it), then clicking on View my Summary (in the center), then clicking on Preview my 1040 (back on the left). 

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