On rental property repair expenses. If it was rented mid-year should I put the whole year expenses or just for the time that it was being prepared to rent and was rented?

[Rider2]

I noticed that when I go back to the property info page, it only shows a portion of what I entered in the "Repair expenses" so I'm assuming the system already prorates the whole year expenses based on the date it was rented, but wanted to double check if I should put the whole year expense (including the time I was living in the house) or only when it was rented?

[DavidD66]

You do not include/enter expenses you incurred while living in the house.  You only include as expenses those costs incurred while the property was available to be rented, or actually rented.  Costs incurred to get the property ready to rent (repairs, painting, etc.) should be added to your cost basis.  

[Rider2]

• Thanks for the quick response @DavidD66. So in that case why does TurboTax reduce the amount dramatically? If I put $3000 and hit OK, it changes to $500 on the summary page

[DavidD66]

It's hard to say for sure with such limited information and not being able to see it.  Since you started renting it mid-year, it could be because you inadvertently set it up like a vacation rental, and indicated the number of days it was rented and the number of days of personal use.  The program would then allocated all expenses between rental and personal based on the number of days indicated for each.  

[Carl]

Most likely it's because you incorrectly indicated it was not rented the entire year, and therefore incorrectly indicated a number of personal use days greater than zero.

Rental Property Dates & Numbers That Matter.

Date of Conversion - If this was your primary residence or 2nd home before, then this date is the day AFTER you moved out, or the date you decided to lease the property – whichever is later.
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 was contracted to move in, and/or "could" have moved in. That would be your "in service" date or after if you were asked for that. Vacant periods between renters do not count for actual days rented. Please see IRS Publication927 page 17 at https://www.irs.gov/pub/irs-pdf/p527.pdf#en_US_2020_publink[phone number removed] Read the “Example” in the third column.
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, 2nd home, or any other personal use reasons 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.

[Rider2]

I moved out on a Thursday, and the tenant moved in the next day, on Friday. It was my primary residence. How should I mark the dates then?

[Carl]

In service date is the date the tenant moved in. Personal use days (if asked for that) is ZERO.

[Rider2]

Should I also calculate the expenses to only those days that the property was rented? Real estate taxes, Insurance premiums, Repairs, and Mortgage interest?

[Carl]

I see you're using the online version. I myself use the CD version. But I can see from your screenshot, exactly why one may be confused between "rental expenses" and "assets".  Looks to me like very poor web design.

Basically, (and I do mean "basically") assets are those things used on a recurring basis in the production of income. So the house is an asset. Installed a new roof on the house? That too is an asset. Replaced the old central A/C? That's an asset.  Assets are not directly deductible per-se. Instead, they get depreciated over time. Assets are entered in the Assets/Depreciation section.

Rental expenses are those costs incurred on a recurring basis in the normal day-to-day operation of a business. For example, property taxes, mortgage interest, property insurance, electric bill, water bill, HOA dues, repairing that broken washing machine, etc. etc. etc.

Note there are situations where assets can be expensed. But in the interest of keeping it simple for now, I see no need to complicate things at this point. (Maybe later?)

Should I also calculate the expenses to only those days that the property was rented? Real estate taxes, Insurance premiums, Repairs, and Mortgage interest?

With the only exception being the property insurance, you don't need to calculate anything. The program takes care of it *if* you elect the option to have the program do it *for* *you*. The only thing the program splits between SCH A for the period of time it was personal use, and SCH E for the period of time it was classified as a rental, is mortgage interest and property taxes.

For property insurance, you will have to pro-rate that manually. Remember, a pro-rated amount of the property insurance is only deductible for the period of time it was classified as a rental. Property insurance for the period of time it was personal use is not (and never has been) deductible anywhere on your tax return.

For rental expenses (do not confuse this with property improvements) you only enter those expenses incurred will the property was classified as a rental. They do not get prorated. So things like utility costs and HOA fees incurred while it was personal use are just flat out not deductible anywhere on the tax return. You only claim what was incurred/paid from the date you converted it to a rental.

Again, please *do* *not* confuse this with property improvements which you enter the Assets/Depreciation section of the program. If you need more clarification I'll be happy to try. I'm just concerned that I might cause further confusion with what I call "information overload".

[Rider2]

I've never used the CD version because I don't know how handy it is, for filing from phone, and continuing on my laptop, and also when I need to look something up later after I filed, how it works. 

Anyway, it is pretty confusing at this point but let me explain my case a little bit more so probably it a few stuff could be eliminated. For the house that I rented, I pay no utility and has no HOA. I don't pay for gardening. Washer/dryer/fridge is tenant's. Since they moved in I only paid for one time sewer line cleanup, and a few small items like water house, etc.

That said, in the screen above, is there an easy answer about prorating each one?

[RobertB4444]

Yes.  You have to figure out what expenses are the whole year and what expenses are just for the rental.

Property taxes are the whole year.  Divide that by 12 and then multiply it by the number of months rented and that is your property tax deduction for the year.  Insurance, mortgage interest, etc., same thing.

Anything you spent directly for the rental is a deduction entirely.  A repair that you do or a bill you pay is 100% deductible.

This all gets even easier next year when it is rented the whole year.

@Rider2 

[Carl]

In the tax year you convert a property to rental, if you elect to have the program "do the splits" for you between SCH E for the period of time it was classified as a rental, and SCH A for the period of time it was your primary residence or other personal use, the only things the program will split, based on the date in service, are mortgage insurance and proeprty taxes. That's it.

For property insurance, one has to prorate that manually for the SCH E portion, and property insurance is not deductible at all for the period of time it was your residence or other personal use.

For all other expenses, you enter 100% of those expenses incurred ***AFTER*** the property was converted to a rental and "in service". All of those other expenses are 100% deductible if they were incurred **AFTER** the property was converted to a rental.