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anilbhandari2018
New Member

I HAVE RENTAL INCOME FROM RENTING SINGLE FAMILY HOME, WHERE I ADD IT THE DEPRECIATION, AND ITEMIZE THE MAINTENANCE EXPENSES?

 
5 Replies
Carl
Level 15

I HAVE RENTAL INCOME FROM RENTING SINGLE FAMILY HOME, WHERE I ADD IT THE DEPRECIATION, AND ITEMIZE THE MAINTENANCE EXPENSES?

Please don't type in all caps. It's hard on the eyes.

You'll deal with all the rental stuff under the Personal Income tab in the "Business Items" section. There's a heading under that section called "Rental Income & Expenses (SCH E)". If you work through that section using the program the way it's designed and intended to be used, you won't miss anything and 95% of the math (including depreciation) will be done for you. Now because of programming and space limitations, the program does not provide the clarity it really needs to provide to a first time landlord in my opinion. So below is the clarity you will need to get this right.

Perfection in your first year is not an option....it's an absolute must. Even the tiniest of mistakes will get exponentially bigger over time. Then when you catch your error years down the road (if the IRS doesn't catch it first) the cost of fixing your mistake can be high. So if you have specific questions as you are doing this, please ask. As I said, perfection is not an option in your first year, it's an absolute must.

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.


keefemorrell
New Member

I HAVE RENTAL INCOME FROM RENTING SINGLE FAMILY HOME, WHERE I ADD IT THE DEPRECIATION, AND ITEMIZE THE MAINTENANCE EXPENSES?

Thanks.  But where in the program can I list the date.  I recall seeing the question but it seem it is not available any longer.  I put the wrong year of date of conversion.

Carl
Level 15

I HAVE RENTAL INCOME FROM RENTING SINGLE FAMILY HOME, WHERE I ADD IT THE DEPRECIATION, AND ITEMIZE THE MAINTENANCE EXPENSES?

It would not be possible to put the wrong year. If you're working on a 2019 tax return and converted it in a prior year, then Turbotax 2019 would not accept that prior year.

But you have to work through each individual asset one at a time to check that you put the correct information.

 

keefemorrell
New Member

I HAVE RENTAL INCOME FROM RENTING SINGLE FAMILY HOME, WHERE I ADD IT THE DEPRECIATION, AND ITEMIZE THE MAINTENANCE EXPENSES?

I mistakenly input 01/01/19 as the conversion date.  I do not see any depreciation when I look at the summary.

 

Carl
Level 15

I HAVE RENTAL INCOME FROM RENTING SINGLE FAMILY HOME, WHERE I ADD IT THE DEPRECIATION, AND ITEMIZE THE MAINTENANCE EXPENSES?

I mistakenly input 01/01/19 as the conversion date. I do not see any depreciation when I look at the summary.

Oh I see what you mean now. With a conversion date of 1/1/2019 I would not expect you to see any depreciation. Just work through the asset again so you can change it to the right date, or remove the date if you want to wait until next year to convert it on 1/1/2020.

Work through the asset again indicating that you stopped using the asset in 2019.

For your "date of sale or disposition" you can either enter the correct date, or leave that field completely blank if you want to wait to convert on 1/1/2020 next year. Then click Continue.

- Now if you elected to leave the conversion date blank so you can wait till next year, work through the asset yet again, and indicate that you did "not" stop using the asset in 2019. That should do it.

As a reminder, this stuff has to match exactly for every asset listed.

 

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