Mortgage Interest

[morganm50]

Please help.  I want to ensure I enter this info correctly.  In the military and relocated from my previous duty station middle of last year.  We kept our home from the previous duty location and are renting it out.  I input the number of days that we lived in it and the number of days it was rented into TurboTax desktop.     

For mortgage interest, do I input the mortgage interest from 1098 in the federal taxes section AND then the same amount in the rental expense section?  Does TurboTax calculate everything and put in the right place?

Thanks

[CesarJ]

No, you don't enter the full 1098 amount twice.  You should enter the interest expense in the "Rental Property" section following these steps:

If your rental property is located out-of-state, make sure you first set up that state properly in My Info (TurboTax Online) or Personal Info (TurboTax Desktop). That way, when you do your state taxes, we'll be ready to go.

To enter your rental:

• TurboTax Desktop: Search for rentals and select the Jump to link or,
  • Go to Federal Taxes.
  • Go to Wages & Income.
  • If asked, How do you want to enter your income?, select I'll choose what I work on.
  • Under Rental Properties and Royalties, select Start or Update next to Rental Properties and Royalties (Sch E).

1. Answer Yes to the question Did you have any income from rentals or royalties?
2. On the next screen, Let's see if you're a real estate professional, select any options that apply to you.
3. On the screen What are you here to report?, select Rental property and Continue.
   • If you have more than one rental property to report, no problem—just start with one, and we’ll come back to the other one(s) later.
4. On the following screens, enter all the info we need about your rental property, including a description of the property, your rental income, any expenses and assets, and other less common situations about your rental.

Tip: Rent is considered income in the year you received it, not the year it applies to. This means that a rent payment for the month of January 2025 collected in December 2025 is reported on your 2025 return.

If you're also filing a nonresident state return to report income from an out-of-state rental property, be sure to complete your nonresident state return before you prepare your resident state return when you get to the State taxes section.

[morganm50]

Thanks but that didn't answer my question.  Let me clarify please.  I lived in the home for half the year and rented for half the year so if I researched it correctly, I have to prorate the mortgage interest based on the number of days to each (which I loaded in TurboTax).   Some of the prorated mortgage interest can be applied to the federal taxes (for the time I lived there) and the rest of the prorated interest can be applied to the rental expense.  My question was does Turbo Tax calculate the prorated interest (after I load the 1098 data) or do I need to prorate it and then input into TurboTax in each of those areas?

Thanks again

[morganm50]

Update:  So I added the 1098 info into the rental expense portion and it assigned a portion of it to the rental expense.  Turbo Tax did not automatically assign the remaining portion into the Federal Taxes area so I did it myself.  Hypothetically, my 1098 says $10,000 in mortgage interest.  I input that into the rental/royalty area and it assigned a portion $6,000 as a rental expense.  Remember, it was almost a half year lived in and the other half year rented out so it was prorated.  The $4000 remainder (I believe) should have been automatically assigned by TurboTax as a federal tax deduction but it was not automatically assigned so I manually input the $4000.  Is this correct?  Thank you

[JamesG1]

It is appropriate to allocate the mortgage interest paid to the personal use reported under Schedule A Itemized Deductions and the rental expense reported under Schedule E.

Retain the computation with your tax records should a tax authority have a question about the deduction at a later time.

@morganm50 

[morganm50]

Thanks much!