If i convered a rental property to my primary residence during the year, and had a mortgage on the the property during the entire time, how do i divide up my mortgage interest (Sched E vs. personal deduction?)

[DS30 · Accepted solution]

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 home was your residence and the number of days (or months) the home was a rental property.

For example, if your mortgage interest is $12,000 and your home 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).

Please note that if your home 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).

Also, make sure that when you are working on your rental income and expenses under the rental section that you select that you converted your home during the tax year under the rental section and (if applicable) this was the first year you rented this property (See screenshot)

To enter your rental mortgage interest  (for TurboTax Online sign-in, click Here) in TurboTax Online or Desktop, please follow these steps:

1. Once you are in your tax return, click on the “Federal Taxes” tab ("Business" tab in TurboTax Home & Business)
2. Next click on “Wages & Income” ("Business Income and Expense" in TurboTax Home & Business)
3. Next click on “I’ll choose what I work on” (jump to full list or see more income)
4. Scroll down the screen until to come to the section “Rental Properties and Royalties”
5. 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 related to your home use;

To enter your Mortgage Interest and Mortgage Insurance in TurboTax Online or Desktop, please follow these steps:

1. 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)
2. Next click on “Deductions and credits”
3. Next click on "jump to full list" or “I’ll choose what I work on”
4. Scroll down the screen until to come to the section “Your Home”
5. 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:

1. Once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
2. Next click on “Deductions and credits”
3. Next click on "jump to full list" or “I’ll choose what I work on”
4. Scroll down the screen until to come to the section “Your Home”
5. Choose "show more", then Property Taxes and follow the onscreen instructions