Other Income Box 3 on 1099-Misc for Rental

[hnguyen01]

Hi,

I received a 1099-Misc with "other income" for my rental property. The other income of 

$2,476.50 was from the deposit for repairs of ~$6,600  to the property from tenant damage. As a result it did not cover the full repairs.

Turbotax is flagging that this income cannot be on a 1099-Misc for rentals, and a series of questions then has it applied to my regular wages. How do I fix this in Turbotax?

I saw one solution was to do a negative offset, but this seems to be incorrect given that it's the rental and not my own personal property.

[ThomasM125]

I assume you mean the insurance money was coded as other income as opposed to rental income income on the Form 1099-MISC. As such, the IRS will look for it on the other income line of your tax return, so if you report it that way, along with a negative income adjustment to cancel it out, it may cause less trouble for you in the long run. It's not technically correct, but your income tax will be correctly calculated.

You could leave the Form 1099-MISC entry your off of your return and reduce your repair expense by the amount listed there. If you do this, the IRS will likely inquire about it later on so you will have to explain what happened. So, it may be better to leave it like you have it now and enter a negative adjustment to income to cancel it out. Then, reduce you repair expense by the amount of the disbursement. Those are your options.

 You can make that adjusting entry in TurboTax as follows:

1. From the Federal menu in TurboTax find Wages and Income 

2. Find Less Common Income

3. Choose Miscellaneous Income, 1099-A, 1099-C

4. Choose Other Reportable Income

5. Enter a description of the entry and the adjustment as a negative number

[hnguyen01]

Hi,

Thank you for the response, it's money retained from the security deposit for repairs, not insurance as you mentioned above. Does this change anything?

So to recap, I state the "other income" from the 1099-MISC on my personal wages, then create an offset and state "rental repair reimbursement". Does that work?

Thank you!

[ThomasM125]

The only thing that will change is it would be best to increase your your rental income by the amount of the receipt as opposed to reducing your repair cost on your rental schedule E. The net rental income will be the same either way so it is not very important which way you do it. Also, you need to be careful that you didn't include the security deposit in rent income when you received it. If you did, then you shouldn't add it in again on your schedule E or deduct it from the repair.

You are correct about the second paragraph, the income is reported as other income which is personal income, then cancelled out by a negative adjustment to other income.

[hnguyen01]

Perfect, thank you! Turbotax has now counted it as a business income but I included the negative offset and it's good to go.

[nouman-masood]

I have a similar situation. How you did the negative off set? TurboTax is flagging me on the Box 3 Other Income. How can i continue?  

[DianeW777]

In the example you have reviewed above, they reported the income as rental income, then entered a miscellaneous expense to remove it because it was for repairs and not rental income. If your situation is the same, then you can use this action for your tax return.

Enter the 1099-MISC as rental income - Box 1, instead of an amount in Box 3 assuming your form has the income in a box other than Box 1.

@nouman-masood