It depends on how you answer certain questions. In the rental property section under your Property Profile, indicate that you rented out part of your home.
On the page, Let Us Calculate Your Expense Deductions for You, a yes answer will allow you to enter the entire mortgage expense and TurboTax will do the math for you based on the rental % of your home. If you choose this method, then you wouldn't enter the deductible personal portion again. TurboTax would transfer the personal portion to schedule A.
A no answer, would require you to do the math and split the rental/personal portions. Enter the rental share under the rental, then navigate to the Your Home section to enter the personal share of interest.
See attachments.
If I answer No, do I enter only the personal percentage on the 1098?
Also, if I bought the home in 2016, do I enter all points paid under the personal section on the 098 or do I allocate a percentage in the rental section?
Points and the interest is allocated to each section. Points on a rental are amortized, not deducted in one year.
It doesn't appear that the "Let Us Calculate Your Expense Deductions for You" page pops up anymore? Where can I enter the % of the house square footage that is rented?
The page 'Let us calculate your expense deductions for You', is still there in the rental section. To enter the percentage, figure the ratio by taking the square foot of rented part of home rented/to the square foot of entire home.
Ex: rented footage is 140 square feet and total property is 1400 square feet. 140/1400 = 10%
Enter 10% in the rental use percentage box and continue to enter your expenses.
I have looked everywhere that I can think to look, and I cannot find this page either.
I can't find it either. This seems like an important calculation. Please locate it for us.
I cannot find a page titled "Let us calculate your expense deductions for you" I never see a page that resembles the second screenshot in this answer even after indicating that I rent out part of my home. Do I need to manually divide the expenses and utilities? Do I enter the mortgage interest payments in the rental section and in my personal property section? These answers remain unanswered with this page missing.
@nzifnub exactly. I never could get to a page that resembles the second screenshot even after an hour and a half on the phone with TurboTax. They just kept referring me to this same help topic. Eventually I decided to manually divide my expenses and utilities, so I hope I did that all correctly. It's hard to check because TurboTax makes calculations behind the scenes that you can't see until you pay and look at the return forms.
Hello, I enter the points for personal and rental, split in half as I own a duplex, but the federal refund goes down, what did I do wrong?
Thank you,
Alejandra
It depends, you are probably not doing anything wrong. If you had included all of the points and interest on the rental, the income from the rental would be less and your taxable income would also be less making your refund higher. When you correctly split the expenses, your overall income would go up and then you refund would go down.
Apparently, it "appears" that TurboTax has fixed a few of the "quirks" with the program, in their last update. Earlier this year when I was testing for those quirks, they were all still present. I'm not seeing them now. But that doesn't mean they got "all" the quirks. These quirks are not self-evident, and if you don't just "know" about them (through osmosis I guess?) things will just flat out never be right.
May I suggest that you totally and completely delete the rental from the SCH E section of the program entirely? You also need to delete everything from the "Your Home" section under the Deductions and Credits tab. Then you can start over in the Rental & Royalty Income (SCH E) section of the program.
When dealing with rental property in the first year, and especially when dealing with renting out a part of your home in that first year, it's extremely important that you work through the program the way it is designed and intended to be used. That way, you will deal with the rental "FIRST", and are more likely to have the option to "let the program do the splits" for you. Then I know for a fact, the program will split things like mortgage interest and property taxes between SCH E based on the percentage of your home *and* the period of time it was a rental, and the SCH A for the period of time no part of your home was a rental. It will also pro-rate those costs that you enter in the "rental expenses" section. But still, read the small print on each screen, as if it won't prorate something for you, the small print will tell you that. Then you have to pro-rate that particular expense manually, yourself.
If you do it this way, then when you get to the "Your Home" section under the deductions and credits tab, you need to "read the small print" on each and every single screen, because that small print will inform you of what data is already has.
Now, lets get into the "quirk" I mentioned earlier. I see you are using the online version of the program. I use the CD version. So our screens are not "exactly" the same. But it's close enough that you should be able to figure it out. Below I cover only the screens that matter here, and not every single screen you will see. But I do cover them in order.
-Three screens in is titled "Do any of these situations apply to this property?" You will select three checkboxes on that screen. 1. 2020 was the first year I rented this property. 2. I rent out part of my home 3. I converted this property from personal use to a rental in 2020.
- Screen titled "Was this property rented all of 2020?" Select NO.
For "days rented at fair rental price" your day count starts on the first day a renter "COULD" have moved in.
For "days of personal use" enter the digit "ZERO". Read the note directly below that. It clearly states that the number of days you lived in this property before converting it to a rental *do* *not* count. Additionally, what is not clarified for "your" specific and explicit situation (so I'm clarifying it here) it's only referring to that portion/percentage of your residence that is "exclusive to the renter". So if you converted one bedroom to rental on 1/7/2020 and you did "NOT" use that bedroom for "ANY" personal use of any type after that date, then you have ZERO days of personal use.
- Screen for "Do you have a home office?" You must select NO on this screen. A home office is not allowed for residential rental real estate. (things are different for business rentals, so that's why this question is here. )
- Screen titled "Let us calculate your expense deductions for you". Select YES. Then for rental use percenage enter the percentage of the square footage of your house that is "exclusive to the renter". That will typically be only a bedroom. However, if that bedroom has a bathroom attached to it that can only be access from that bedroom, then you can (and should) include the square footage of that bathroom also. (Don't forget the closet in that bedroom, as that's at least another 12 sq feet.)
-Next screen select that yes, you are an active participant.
- Next screen, no you didn't pay for any work that requires you to issue s 1099 of any type.
Keep working though until you are returned to the "Review Your [propertyname] Rental Summary" screen.
- Now elect to start/update Assets/Depreciation.
- Do you have assets for this property that can be depreciated? You *must* answer yes to this.
- A few screens later you get to "Describe this Asset". Select Rental Real Estate Property and continue.
- Select Residential Rental Real Estate and continue.
- Enter a description for this asset (something like "rental bedroom" is fine), along with the total entire cost you paid for your property when you originally purchased it, the portion of the cost that you are allocating to the land (anywhere from 10% to 30% of what you entered in the cost box, typically.), the date you originally purchased the property, and continue.
- Select "purchased new" and "no, I have not always used this item 100% for business". Then select "I used this item for personal purposes before I started using it in this business." For the "date I started using this in this business" enter the first date that a renter "could" have moved in. It is assumed that you did NOT use this room or space for any type of personal use after this date.
Now here's the "quirk" I was talking about. The last question on this page is "Percentage of time I used this item for this business in 2020 (e.g. 80%)" That is the wrong question to ask. The program already "knows" the percentage of time, because the program has already figured the percentage of time based on the date you entered above that question. So the question "should" be, asking you for the percentage of floor space that you are renting exclusively to the renter. So for this one question, do not enter percentage of TIME. Instead, enter the percentage of FLOOR SPACE that is exclusive to the renter. Then continue.
Now click the "show details" checkbox. There you will see the date placed "in service" a rental, along with the percentage of your floor space that was actually placed in service as a rental. If you agree with those numbers, you're good to go and can click that continue button, then click the DONE button.
Now, you can elect to start/update the rental income section, followed by the rental expenses section. But I see that things are even more tricky here, since the last program update.
In the rental expenses, you will enter only those expenses paid for the "whole house" from the date you placed the rental portion "in service". Lets use the utilities expense category as an example. Utilities include all those utilities that you share with the tenant. Water, electric, cable, internet, etc. So for the sake of simplicity lets say you pay a flat rate of $100/mo for your utilities. Thats $1200 a year. You coverted 10% of your floor space to a rental space on 7/1/2020. That's exactly halfway through the year. So your utilities cost you $600 from 7/1/2020 through the remainder of the year. That's the amount you would enter. With 10% of your floor space exclusive to the renter, the program (not you) will allocate 10% of that, which is $60, to the SCH E. The remainder is just flat out not deductible anywhere on your tax return.
When asked for your mortgage interest, you will enter the total amount you paid, as reported to you on the 1098-Mortgage Interest Statement. The program (not you) will do the math to determine what amount gets allocated to the SCH E based on the percentage of time rented, and percentage of space rented.
Any costs that you enter in the "Miscellaneous Expense" section, you will have to pro-rate yourself based ONLY on the percentage of time rented, and only if applicable. The program will pro-rate "for you" only based on the percentage of space rented. (man, they really screwed the expenses section up, with their latest program update. I'll address this with the forum moderators later.)
If you use the non-online version of TurboTax (CD/Download) then go to the tax data button on the toolbar. Search for "percentage". Find your owner occupied rental under "Schedule E Wks" and select the "percentage rental use" and select "go to form". Find the section that says "Owner-Occupied Rentals:" and on item P check the box for "Check to allocate personal use items to Schedule A". Under item Q for "Percentage of Rental Use" put the percentage of rental use. For instance, if 4 rooms of your house out of 7 rooms are a rental, put in 57.1428%. Then on the tax software, enter the full values for expenses, depreciation, etc. and the software will do the work for you. Just realize that if you spent money specifically for the rental rooms, this will not correctly expense those as 100% against the rental rooms and will allocate a percentage to the entire house. If you have this situation, you will unfortunately manually have to keep track of which expenses are for the rental rooms and make sure 100% of those expenses are taken into account and for expenses that are general to the entire house, you take the percentage.
I wish the software would be upgraded to ask you questions to facilitate this as this has been broken for years now. I wonder what TurboTax software developers are doing all year. I wish in addition to modifying their software for changes to tax rules, they'd fix bugs and defects and improve the software. Regardless, I still love it.
It appears that the Let Us Calculate Your Expense Deductions for You prompt will only appear when you select that you have rented out the unit for the entire year. This is allowable even if the unit was not rented out the entire year if it's the first year you've rented the unit, as noted previously. If you do anything else, TurboTax will not provide the "Let Us Calculate" prompt.
Frankly, I don't trust TurboTax to do this calculation properly. I originally was going to allow TurboTax to do the calculation and had selected this option and entered the SqFt ratio for the rental portion on my home. When I noticed issues and tried to change the selection to "No, I'll do the math and enter the rental-only portion", I couldn't get the prompt back. That's because I'd changed my response to the "entire year" question to "no". Once I changed it back, I got the prompt again.