Pennsylvania for-profit rental property

[turtle9]

TurboTax for Pennsylvania state tax seems to confuse for-profit and business rentals.

According to PA-40 instructions, a rental can be for-profit but not be considered a

business for PA tax purposes:

"If you rent or lease your property to realize a profit, but do not operate the rental

property as a business activity, you may offset losses against other rental or royalty

income."

But if a rental is not for profit (and not a business), PA-40 instructions say that:

"You may only deduct your rental expenses up to your rental income, and you may

not use a loss to reduce other rental income."

PA-40 instructions say that Pennsylvania follows IRC Section 280A to determine if

a rental is for-profit (for example, rental of a unit that is also used by the  taxpayer

or below fair market price is not considered for-profit).

On the contrary, Turbotax guidance for  "Is this a for-profit property? When to check this box"

says:

"Your rental is considered a for-profit (business activity) rental when ..." followed

by a characterization of *rental business*  (not for-profit rental) according to

PA-40 instructions.

Following this guidance, people who do not have what Pennsylvania considers a rental

business but do rent with the intent of making a profit will unnecessarily declare their

rentals as not for profit, missing opportunities for losses to offset profits in other rentals and

in such cases having to pay higher taxes.

Moreover, there does not appear to be any obvious way to properly declare a rental

business in Turbotax Pennsylvania. If you click the "for profit" button, the rental unit

ends up in PA Schedule E and PA-40 line 6, not PA Schedule C and PA-40 line 4, as

should be the case in rental businesses.

So, it looks to me that there are two bugs in Turbotax Pennsylvania: (1) incorrect guidance

for non-business but for-profit rentals; and (2) no (obvious) way to declare a rental business.

Can more experienced users confirm?

[Anonymous_]

Are you using a desktop or online version of TurboTax?

If you are using a desktop version, you can likely resolve this issue in Forms Mode.

Otherwise, for a programmatic issue, you need to contact Support.

What is the TurboTax phone number? (intuit.com)

Very few, if any, users who post here would (a) have the PA module installed and, (b) have the ability to answer your specific questions.

[turtle9]

I use Turbotax desktop on Windows.

This forum is for investors and landlords. I would hope landlords from

Pennsylvania who use Turbotax would share how they deal with the

"for-profit" rental question.

If there is an error in Turbotax on-demand guidance (help window),

I think it should be acknowledged and Intuit should fix it, rather

than point out workarounds.

If you know a channel for reporting and tracking TurboTax bugs properly,

please share it. A support phone is not a proper bug reporting and tracking

system.

[Anonymous_]

I will pass your original post along to the Moderators.

Please understand, however, that currently there are no Intuit employee/experts regularly posting on this board (they are typically here during tax season and special events), only volunteers (aka Champs). Thus, the likelihood that a user would have the PA module installed, run into exactly the same issue, notice your original concern, and post a helpful response, is somewhat remote.

Again, I will pass your concern along but if this is truly a bug, the only way to handle the issue would be to make an adjustment in Forms Mode until the bug is fixed by the developers.

Thank you.

[turtle9]

Thanks for forwarding my post to the moderators. Hopefully

they will post it to some internal bug report and tracking system

Intuit may have, or otherwise send it to product QA or developers.

The issue I pointed out is *not* a rare case. *Every* landlord in

Pennsylvania needs to classify *each* rental unit as

(1) part of a business activity or not; and

(2) for-profit or not, as defined by Pennsylvania,

in order to properly calculate and report state taxes.

Turbotax on-demand guidance implicitly assumes

that a rental can be for-profit only if it is considered

part of a business activity, as defined by Pennsylvania.

That is not true.

For rentals that are not part of a business activity, the

correct workaround seems to me to be to *ignore*

Turbotax on-demand guidance (help window) and

instead download and follow PA-40 instructions for

whether a rental is "for-profit" or not.  There is no

need to make adjustments in Forms mode.

But this workaround defeats the purpose of buying

Turbotax. Most people expect tax software to

break down the complex original tax rules and

instructions into easy-to-answer questions.

For the "Is this a for-profit property?" question,

I think Turbotax currently fails to provide the

correct guidance.

[Anonymous_]

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@turtle9 wrote:

The issue I pointed out is *not* a rare case.

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I understand, completely, and meant to convey that it would be a rare case for someone who posts regularly on this board to encounter that issue and provide a useful response.