I have an owner occupied rental property which was rented out for 167 days , 50% of the property. Where do I enter mortgage interest and mortgage insurance?

[ameegosar]

I tried entering this first in the rental section but only half my mortgage interest is getting deducted and if I add it in deductions as well as rentals it does a 1.5 deduction both are wrong

[ReneeM7122]

To report the mortgage interest and insurance on a 50% owner-occupied rental, enter the data on both Schedule E and Schedule A.

Schedule E: Enter 50% of the total of the property taxes and interest paid in 2020.

Schedule A: Enter the non-rental portion (50% of the total) paid in 2020. 

Here's a TurboTax article about real estate tax and rental property.

[Carl]

The "days rented" count starts from the first day a renter "could" have moved in.

The "days personal use" is asking the number of days you used the portion classified as a rental for personal use *AFTER* the date you converted it to a rental. What you used it for prior to converting it to a rental does not count for anything. Typically this will be ZERO days of personal use.

If you converted a percentage from personal use to rental use in the tax year, then you are also asked a question that is in fact *the wrong question* for your specific and explicit situation. The question reads:

"Percentage of time I used this item in this business in 2020 (e.g.;80%)"

That question (only for your specific situation if the conversion was done in 2020) should read "percentage of floor space I used in this business in 2020". So on that screen (the one right before the summary screen) enter the percentage of floor space that was classified as a rental for any period of time in 2020.

The program already knows how many days it was a rental, based on the date you entered for the in service date. But it doesn't know how many days of the rental period you may have used that space for personal use, and it doesn't know what percentage of the floor space was exclusive to the rental portion. (Even though the program did ask for that on an earlier screen, it doesn't use that number in the key math computation where it needs to use it.)

Note also that if done correctly, the program will only split mortgage interest and property taxes betweeen the SCH A and SCH E. It's up to you to prorate the property insurance and all other expenses.  The program will only prorate those "other expenses" further, only if you have personal use days of the floor space, after the date you converted that space to rental.

[Anonymous]

Carl's response solved my problem.

For me in the 2021 tax year version: I put "Days rented at a fair rental price"  and put 0 for "Personal use during the year". It then asked me a question about "Rental Use %", which you list, 50%, 33%, whatever you have determined. Check the recommended option of having TurboTax allocate for me. Then I put all (Total 100% for owner + rental portion) of the mortgage interests, property taxes, expenses, maintenance,  in this "Wages & Income" section for this rental property. It is then allocated subsequently in the "Deductions & Credits" section.

*Important* I deleted the property tax and mortgage interests ($0) in the "Deductions & Credits" since it is automatically allocated previously from the rental property. You can verify by looking at the rental versus personal allocations in Schedule E by looking at the table when you switch to “Form” mode. 

[Carl]

*Important* I deleted the property tax and mortgage interests ($0) in the "Deductions & Credits" since it is automatically allocated previously from the rental property.

A majority of people miss that little "note" on that screen, telling them it's already allocated the schedule A portion. I actually wish that in addition to that note, that screen would have a box for "already allocated" or something, and show the allocated amount. I think that would "get your attention" when seeing a figure you didn't enter, and would more likely cause you to read the note and understand where it came from. 🙂

[MichaelF6]

@Carl @Anonymous Thanks for the discussion, it seems the mortgage interest number auto-allocated to ScheduleA does not take the $750,000 limit into account since it doesn’t ask for mortgage balance, i.e. higher than the limit, wonder how to resolve this issue?

[BrittanyS]

We can look into your concern that TurboTax isn't considering the $750,000 limit regarding the mortgage balance. However, it would be helpful to receive a token instead of trying to recreate your return.  If you provide a token, I can look over what you see regarding your return. A token is a number entry provided by TurboTax that provides a sanitized version of your return.  Sanitized means that all your personal identification information is removed from the file you provide, and I'll only be able to see numbers that have been entered.  I cannot see any information about your name, address, or SSN.

To send us a token, please do the following: 

TurboTax Online:  

1. Click Tax Tools in the menu to the left.
2. Click Tools, and then
3. Click Share my file with Agent.
4. A pop-up message will appear. Click OK to send the sanitized diagnostic copy to us.

TurboTax Desktop:

1. Select the Online menu if the customer is using Windows. Select “Help” if using a Mac.
2. Select Send Tax File to Agent.
3. A pop-up message will appear, and the customer will select, Send. If using Mac, "Send Tax File to TurboTax Agent." 

Provide the token number that is generated onto this thread.  At the bottom of your reply (with the token), add "@BrittanyS" so I will be notified.

@MichaelF6

[Edited 02/09/23 | 11:14 AM PST]

[MichaelF6]

Thanks @BrittanyS , here is the token number 1067438

[BrittanyS]

Thank you for providing the token.  We will review your concern and post back once we look into this further.  

@MichaelF6

[Edited 01/31/23 | 9:11 AM PST]

[BrittanyS]

It has been determined that the limitation for mortgage interest when renting your home is an unsupported calculation in the 2022 TurboTax Software program.  If the restriction applies to you, you will need to manually adjust the interest deduction amount on the tax and interest deduction worksheet for Schedule A, Form 8820, and/or the Schedule E worksheet.  Please see IRS publication 936 for assistance.

@MichaelF6  

[Anonymous]

Hi Brittany,

Can you please explain? I tried to allocate it the same way that I did in 2021, but it's not working. I indicated that it's an owner-occupied rental and the software failed to show up on the Schedule E when i tried to double check. It didn't automatically allocate and split like it did in 2021!! Can you please help? Thank you 

[HopeS]

Since your mortgage is over the $750K limitation you will have to manually compute the portion that should be on Schedule A and Schedule E and enter each manually in the Interview section of each form (Schedule A and Schedule E).

For example, if your mortgage balance is $1 million you would divide $750k by $1 million to get .75. If your mortgage interest was $80K then multiply this amount by .75 which results in a mortgage interest deduction of $60,000. You will then allocate the $60,000 between Sch A itemized deduction and Schedule E. Please keep a record of your calculation in case you need to provide support to the IRS.

@Anonymous 

[Anonymous]

@HopeS no, my property mortgage is not over $750k. That was a question by another user on this thread. What I’m saying now is that it doesn’t work like in the 2021 version anymore! The automatic allocation is not there. Perhaps I’m using it wrong. 

[AmyC]

@Anonymous I am going to assume that you own a property- rent part, live in part. The program will let you choose whether you want to do the math or let the program. If you let the program, it will divide between sch A and sch E for you. If you choose to do the math, you need to enter the correct amount in each section. You must mark that you live in part of the property FIRST to trigger the question.