How to Enter a Rental in Turbotax

[TechieGal]

I have a fundamental question. I'm a Florida resident. From May through October (<180 days) I live in a condo that I own in Virginia.  From November through April (50%) the condo in Virginia is rented out.

A) Is it a vacation home where my deductions are limited to income? Looks like Turbotax sets depreciation to 100% and doesn't allow me to over ride it on the Sch E worksheet.

B) Is it a rental where it's rented 185 days and personal use is 0 days during this interval? I can edit the Asset Depreciation Worksheet to make the depreciation 50%

I need help on how to correctly enter this into the Schedule E worksheet, and if I need to adjust the % business use on the Asset Depreciation Worksheet. I asked earlier, but have two different answers. Trying to just get down to basics - is it a Vacation Home with personal use, or a Rental?

Thanks in advance for your help!

[tagteam]

Do not adjust the business use percentage.

You have a vacation rental and, as a result, your expenses may be limited (and will be limited in your case).

Ensure, absolutely, that you enter both the number of fair rental days and the number of personal use days. The program will adjust the expenses accordingly and, if necessary, limit the available deductions.

[Carl]

I see it a different way.

A) Is it a vacation home where my deductions are limited to income? Looks like Turbotax sets depreciation to 100% and doesn't allow me to over ride it on the Sch E worksheet.

That's because depreciation is 100% *during the period of time it is classified as a rental*

B) Is it a rental where it's rented 185 days and personal use is 0 days during this interval? I can edit the Asset Depreciation Worksheet to make the depreciation 50%

Yes, provided you clearly identify the starting date of it being classified as a rental, and the ending date of it being classified as a rental. So long as there is no personal use between the start date and end date, it's 100% depreciation.

But overall, the program can not handle a situation such as yours without manual intervention and manual math on your part, every single year to correct the cost basis so you can account for prior year's depreciation already taken. It's the only way to keep the depreciation right each year, and it's an absolute math nightmare to deal with every year.

You might be better off leaving the property classified as a rental for the entire year and then claiming your number of days of personal use each year. It's the only way I know of that the program will keep the depreciation on track without you having to manually intervene every single year.  You just enter total expenses for the entire year and the program will pro-rate everything based on your personal use number of days.

[tagteam]

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@Carl wrote:

....provided you clearly identify the starting date of it being classified as a rental, and the ending date of it being classified as a rental.

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That will not work because the program will default to the mid-month convention (i.e., it will treat the starting date as the middle of the month and the ending date as the middle of the month).

The asset depreciation worksheet (or business percentage) can be adjusted to accommodate the depreciation allocation only (which would be more appropriate than starting and ending depreciation on certain dates - which will not work, regardless).

It should also be noted that expenses directly related to rental use are not prorated (i.e., no percentage of the expenses are allocated to personal use). For example, advertising for renters, commissions paid to rental agents, and repairs done during rental use (as a result of that use) are allocated 100% to rental use.

[TechieGal]

Thanks for the help. I think that when I mak\de it a full time rental and then just entered my personal use days, I never need to put in a start and end date. But Turbotax automatically treats it like a vacation home, with 100% depreciation, and limited my deductions. 

What say you?

[tagteam]

You should not put in a start and end date for a vacation rental that is, almost by definition, used for personal purposes at times throughout the tax year.

You can enter a business use percentage for the asset(s) (particularly the condo itself) and make an adjustment in that manner.