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How do i enter partial mortgage interest of my 1098 as i rented only 10 months in 2018 and lived 2 months in the property?

 
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4 Replies
Carl
Level 15

How do i enter partial mortgage interest of my 1098 as i rented only 10 months in 2018 and lived 2 months in the property?

If you let the program do the splits for you, then you just enter the total amount. Otherwise, if you elected to do the splits manually yourself, enter 1/12 of the mortgage interest on the SCH E for each month the property was classified as a rental. Then enter 1/12 of the mortgage interest on the SCH A for each month it was your residence. You'll find the below information helpful too, if 2018 was your first year leasing the property out.
Carl
Level 15

How do i enter partial mortgage interest of my 1098 as i rented only 10 months in 2018 and lived 2 months in the property?

Rental Property Dates & Numbers That Matter.

Date of Conversion - If this was your primary residence before, then this date is the day AFTER  you moved out.
In Service Date - This is the date a renter "could" have moved in. Usually, this date is the day you put the FOR RENT sign in the front yard.
Number of days Rented - the day count for this starts from the first day a renter "could" have moved in. That should be your "in service" date if you were asked for that. Vacant periods between renters count also PROVIDED you did not live in the house for one single day during said period of vacancy.
Days of Personal Use - This number will be a big fat ZERO. Read the screen. It's asking for the number of days you lived in the property AFTER you converted it to a rental. I seriously doubt (though it is possible) that you lived in the house (or space, if renting a part of your home) as your primary residence or 2nd home, after you converted it to a rental.
Business Use Percentage. 100%. I'll put that in words so there's no doubt I didn't make a typo here. One Hundred Percent. After you converted this property or space to rental use, it was one hundred percent business use. What you used it for prior to the date of conversion doesn't count.

RENTAL POPERTY ASSETS, MAINTENANCE/CLEANING/REPAIRS DEFINED

Property Improvement.

Property improvements are expenses you incur that add value to the property. Expenses for this are entered in the Assets/Depreciation section and depreciated over time. Property improvements can be done at any time after your initial purchase of the property. It does not matter if it was your residence or a rental at the time of the improvement. It still adds value to the property.

To be classified as a property improvement, two criteria must be met:

1) The improvement must become "a material part of" the property. For example, remodeling the bathroom, new cabinets or appliances in the kitchen. New carpet. Replacing that old Central Air unit.

2) The improvement must add "real" value to the property. In other words, when  the property is appraised by a qualified, certified, licensed property appraiser, he will appraise it at a higher value, than he would have without the improvements.

Cleaning & Maintenance

Those expenses incurred to maintain the rental property and it's assets in the useable condition the property and/or asset was designed and intended for. Routine cleaning and maintenance expenses are only deductible if they are incurred while the property is classified as a rental. Cleaning and maintenance expenses incurred in the process of preparing the property for rent are not deductible.

Repair

Those expenses incurred to return the property or it's assets to the same useable condition they were in, prior to the event that caused the property or asset to be unusable. Repair expenses incurred are only deductible if incurred while the property is classified as a rental. Repair costs incurred in the process of preparing the property for rent are not deductible.

Additional clarifications: Painting a room does not qualify as a property improvement. While the paint does become “a material part of” the property, from the perspective of a property appraiser, it doesn’t add “real value” to the property.

However, when you do something like convert the garage into a 3rd bedroom for example, making a  2 bedroom house into a 3 bedroom house adds “real value”. Of course, when you convert the garage to a bedroom, you’re going to paint it. But you will include the cost of painting as a part of the property improvement – not an expense separate from it.


How do i enter partial mortgage interest of my 1098 as i rented only 10 months in 2018 and lived 2 months in the property?

Hi Champ, you seem to be the expert on this topic. You mention several times following the steps sequentially, but there does seem to be something wrong with the software. I have had a rental property for years. I have live in part of it and a tenant in the other. It's 50/50%. In prior years the mortgage interest and taxes have split appropriately, so that only a portion is showing up on the Schedule E for the rental property. This year though, the full amount is showing up. I have read every question carefully and was never asked about the split this year. I think maybe the glitch is that the system asks the first years and not subsequent years. Not only that, but I can't find a way to navigate to that question and I've called into the help line and they have no idea. I could manually enter it, but I would like to know if I'm missing something!??

DaveF1006
Employee Tax Expert

How do i enter partial mortgage interest of my 1098 as i rented only 10 months in 2018 and lived 2 months in the property?

Go to your property summary, and review your property profile by selecting update.

 

  1. Go to the section that says Do Any of These Situations Apply to the Property.
  2. Under rented, indicate that you rent out part of your home.
  3. Continue through the next two screens until you reach a screen that says Let us Calculate the Expense Deduction for You.
  4. Here say yes, let Turbo Tax Determine the deduction. Then there will be a drop down where you will enter 50% as the Rental Use Percentage.

If you perform these steps and still get the same results, go to step 4 and say no, you will do the math and enter only the rental-related  portion.

 

@justincbro 

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