It depends but if this rental property was not available for rent for all of 2016, you will not report any amount of this rental property under the rental section.
Instead you will be able to claim the mortgage interest, mortgage insurance and property taxes under the home section of Deductions and Credits as deductible items related to a second home.
To enter your Mortgage Interest/insurance/property taxes related to rental property that was not available for renting during all of 2016 in TurboTax Online (for TurboTax Online sign-in, click Here , then select "Take Me to My Return") or Desktop, please follow these steps:
- Once you are in your tax
return, click on the “Federal Taxes” tab ("Personal" tab in
TurboTax Home & Business)
- Next click on “Deductions and
credits”
- Next click on "jump to
full list" or “I’ll choose what I work on”
- Scroll down the screen until
to come to the section “Your Home”
However, if the rental property was available for rental during 2016 but was not rented, then you will be able to claim some of these rental expenses under the rental section.
Related to your rental repairs -
If you made repairs to the property before it was available for renting, you will not be able to deduct these costs. However, for repairs made after the rental property was available for rent, these costs can be expenses as rental maintenance costs.
Related to your rental renovations (capital improvements) -
For any renovation costs that improve the property and that provides this benefit for more than one year, you will need to
capitalize these expenses. You will be able to claim an
annual depreciation expense over the life of the capitalized assets.
For renovations made before the rental property was available for rent, you will increase the basis in your rental property by the cost of these renovations and depreciation these costs along with your rental property.
According to the
IRS, expenses that may result in a betterment
to your property include expenses for fixing a pre-existing defect or
condition, enlarging or expanding your property, or increasing the
capacity, strength, or quality of your property are considered expenses
that must be capitalized.
Click Depreciation of rental
property for more information about depreciating a capital
improvement.
Related to Rental Assets -
You will need to enter your rental property as an asset under the rental section
To enter this transaction in TurboTax, log into your
tax return and type "rental (schedule e)" in the search bar then
select "jump to rental (schedule e)", TurboTax will guide you in
entering this information
Alternatively, to
enter this transaction in TurboTax Online (for TurboTax Online sign-in,
click Here) or Desktop, please
follow these steps:
- Once you are in your tax
return, click on the “Federal Taxes” tab ("Business" tab in
TurboTax Home & Business)
- Next click on “Wages &
Income” ("Business Income and Expense" in TurboTax
Home & Business)
- Next click on “I’ll choose
what I work on”
- Scroll down the screen until
to come to the section “Rental Properties and Royalties”
- Choose “Rental Properties and
Royalties” and select “start’ (or “update” is you have already worked on
this section)
Enter your rental property information through the
TurboTax guided questions until you come to a screen that is titled, Your
"rental property name" rental summary. You will enter your rental
property house here under "assets/depreciation" (see
screenshot #1)
- Under the asset/depreciation
section - select start
- Select "yes" to
"Do you have assets for this property that can be depreciated?
- About 3 screens in, you will
enter the house as an asset here. This is where your enter all your
rental assets (including capital improvements)
- For the rental
house (or any capital improvements), you will select
"rental real estate property"
- Then for the rental house,
select "Residential Rental Real Estate"
- On the next screen, you will
enter information about your Rental property asset including:
- Property description -
usually street address
- Cost - generally what you
paid for the rental plus the cost of any capital improvements
- Cost of Land - If cost, as
listed above, includes land, put the total amount of land cost here
(land is not a depreciable asset)
- Date purchased or acquired
- this is the original of purchase or acquisition of the rental house.
- On the next screen report
purchased new or sold in current year and your business use of the
property since acquisition.
- You will then get a screen
that will confirm prior year deprecation (If asset is over one year old)
Just remember that the IRS assumes that you have taken the correct amount
of deprecation on your rental asset regardless of if you did or did not)
If you change this amount, TurboTax will calculate a new straight line
depreciation amount using the new basis information (cost less prior year
depreciation) over the assets remaining life.
- Please note that if you
change this prior year (accumulated) depreciation amount from that being
generated by TurboTax, your current year's depreciation will be
calculated based on the new basis information (cost less newly entered
accumulated depreciation) over the remaining life of the asset.
- Then you will get an asset
summary page showing current year's deprecation. If you select show
detail you can review your entry details (screenshot #2)
- You can add additional
rental assets on the next screen by selecting "add an asset"
(screenshot #3)
Here is a link
that can provide you with helpful information related to your rental
property
TurboTax
- Tips on Real Estate Taxes and Real Property
Related to other rental expenses -
You will be able to claim rental expenses for any expenses incurred after the rental property was available for rent (regardless if it was actually rented).
You will report your rental income and expense
on Schedule E. If your expenses exceed your income, these expenses
may be suspected due to the passive activity rules. However, according to the
IRS, if your rental expenses exceed rental income you may report a loss up to
$25,000 on your tax return, limited for adjusted gross incomes above $100,000.
TurboTax
will help guide you on entering this information. Make sure that you pay close
attention to the questions regarding at-risk issues and limitations.
For more information on rental income and expenses,
including passive activity loss limits, refer to Publication 527 and Publication 925, Passive Activity and At-Risk Rules.
When entering your mortgage information, you can
divide the amounts of mortgage interest, mortgage insurance and property taxes
between the number of days (or months) the rental property was not available for rent during the year
and the number of days (or months) the rental property was available for rent (regardless of it was actually rented or not).
For example, if your mortgage interest is
$12,000 and your rental property was only available for rent for 5 months, then
$5,000 will be allocated to your rental (Schedule E) and $7,000 will be
allocated to your home mortgage interest deduction (Schedule A) as a second home.
Please note that if your rental property was available for
rent for 12 months but only rented for 5 months, you will allocate based on
rental availability regardless of how long it was actually rented. So in this
case, you would allocate the entire amount to your rental property ($12,000).
To enter your rental mortgage interest (for
TurboTax Online sign-in, click Here)
in TurboTax Online or Desktop, please follow these steps:
- Once you are in your tax
return, click on the “Federal Taxes” tab ("Business" tab in
TurboTax Home & Business)
- Next click on “Wages &
Income” ("Business Income and Expense" in TurboTax
Home & Business)
- Next click on “I’ll choose
what I work on” (jump to full list or see more income)
- Scroll down the screen until
to come to the section “Rental Properties and Royalties”
- Choose “Rental Properties and
Royalties” and select “start’ (or “update” is you have already worked on
this section)
Enter your rental
property information through the TurboTax guided questions (or edit your rental
property if it is already entered) until you come to a screen that is titled,
Your "rental property name" rental summary.
Select to edit your
rental expenses>I'll choose what I work on> click through several screen
until you get to one titled "Report Mortgage Interest". Put your
mortgage interest from Form 1098 here.
For any portion of your mortgage interest, insurance
and property taxes not related to your rental use days;
To enter
your Mortgage Interest and Mortgage Insurance in TurboTax Online or
Desktop, please follow these steps:
- Once you are in your tax
return (for TurboTax Online sign-in, click Here), click on the “Federal
Taxes” tab ("Personal" tab in TurboTax Home & Business)
- Next click on “Deductions and
credits”
- Next click on "jump to
full list" or “I’ll choose what I work on”
- Scroll down the screen until
to come to the section “Your Home”
- Choose "show more",
then Mortgage Interest, Refinancing and Insurance and follow the onscreen
instructions.
To enter
your Property Taxes in TurboTax Online or Desktop, please follow
these steps:
- Once you are in your tax
return, click on the “Federal Taxes” tab ("Personal" tab in
TurboTax Home & Business)
- Next click on “Deductions and
credits”
- Next click on "jump to
full list" or “I’ll choose what I work on”
- Scroll down the screen until
to come to the section “Your Home”
- Choose "show more",
then Property Taxes and follow the onscreen instructions
