I have a rental unit and I have added all of my expenses, but the total expenses is different the the total I entered. I entered $6185, TurboTax shows $3480. Why the diff

[Carl]

While you will claim *all* expenses, your *allowed* expenses can not exceed your taxable rental income. Once your rental expenses gets your taxable rental income to zero, that's it. Any remaining expenses are carried over to the next year. But understand that if you don't "claim" them on the 2016 return, then you can not carry them over to next year's return.

[geknopp]

Makes sense, however, my 1099-MISC Box 1 (Rents)  has a value of $7780.65, so wouldn't my $6185 be allowable as expenses?

[Carl]

You have depreciation and mortgage interest which generally takes up a few thousand in deductions all by itself. I've been dealing in rental property for over 25 years now, and because of depreciation, I never had a taxable profit on the rental income until a few years after I paid off one rental. It took awhile for all those accumulated carry over expenses to get used up, resulting in a taxable profit from the rentals for my first time ever, after 23 years.

[geknopp]

Thanks, Carl, for the quick response. I didn't enter interest, property taxes, etc here, since I had already added it in my itemized deductions. I am using a management company, so the 7780 includes income (security deposit, etc) that I did not receive. I actually received checks for about $4600. They show addition income of minus $4000 on the income statement they sent me. Make sense?

[Carl]

It doesn't matter if you're using a management company. If you own rental property, everything (and I do mean everything) concerning that property is reported on SCH E. You can't claim any rental expenses (including mortgage interest and depreciation) on your SCH A. It all *has* to be reported on the SCH E.
This is because rental income is passive, and therefore the rental expenses can only be deducted from that passive income. Whereas deductions claimed on SCH A are deducted from non-passive income.

[christinadelre]

Hi Carl - thanks for the info above...follow-up question...is it possible to report rental income on a property I don't own, i.e. a sublet?

[Carl]

Yes, assuming the income is not a commission or other "management fee" paid to you by the owner In a case where you are subletting a property you already pay rent for, you can't depreciate it. The way to deal with that in TurboTax is to enter a zero for the cost, and cost of land.

[christinadelre]

Thank you, Carl. So does that mean I shouldn't report this rental property income at all? TurboTax does not seem to recognize my property as potentially not being owned by me. When I go to the Property Profile section, one question is "Were you the only owner of this property in 2017?" and I respond "No, I owned less than 100%." Then I enter 0% as my ownership percentage. The next question is "Did you own this rental property for all of 2017?" and the only responses I can select are "Yes I owned this property all year" or "No I owned this property only part of the year" - neither of these are true since I didn't own it at all. Also, after making these selections, even though rental income entered was $1600, the total is showing as $0, I'm assuming because I entered 0% property ownership. Your expertise is greatly appreciated! Thank you in advance for your time. 🙂

[christinadelre]

Ok I found the answer in another question asked in the community. So I selected that I owned the property and I owned it all year. I'm still unsure as to why (like the original question that this post started with) my Expenses total is only $1089 when I entered $1535 in total. My rental income was $1686 so it's not a loss. Why is TurboTax only accounting for $1089 out of $1535 in expenses? Here's the breakdown: Cleaning/Maint - $352; Commissions - $200 (this was for a co-host that helped me); Professional Fees - $45; Mgmt Fees - $825 (rent for the period I was subletting); Repairs - $20; Supplies - $20; Utilities - $73. If you add these up, you get $1535 but TurboTax displays the total as $1089. Again, really appreciate your time and input!

[christinadelre]

More info: TurboTax reduced Cleaning/Maint from $352 to $14, Repairs from $20 to $1, Supplies from $20 to $1, and Utilities from $73 to $3.

[Carl]

Are you sub-letting the entire property? All 100% of it? (Meaning that you did not live in it at all for one single day?)
Generally folks I see with a situation like (or similar) to yours have someone who lives with them so the rent can be paid in full and on time each month.
It's usually best to just treat it as a "cost sharing arrangement" and report nothing concerning the sub-let of that extra bedroom. But if you're in a state that offers a renter's credit and the room mate wants that credit, then you're required to report the income. Then in some states you have to register with that state as a rental property owner, in order to be able to issue a valid renter's credit certificate. This can create an even bigger issue with registering, since you don't legally "own" the property being rented out.