Primary and only home converted to rental mid-year

[Diyana]

We moved out of our primary home and out of the country at the end of July and converted it to a rental. Do we enter the mortgage interest and property tax in the rental or primary home part of the forms?

[PaulaM · Accepted solution]

You will be allocating the rental/personal amounts of expenses. Ex: Lived in home for 9 months and rental for 3 months. Allocate 75% of interest/property taxes as a personal deduction and 25% as a rental deduction.

Enter your property under the Rental Properties and Royalties section.  In the rental property section under your Property Profile, indicate that 2016 was the first year to rent the property and that you converted the home from personal to rental (or vice versa).

On the page, Was this Property rented for all of 2016?, select 'No', to open up the dialog box. Enter the rental use days and the personal use days.

Note:  The personal use days means did you use the rental personally after it was placed in service (like a vacation property). Enter '0' if you did not use the property yourself after it was placed in service

After entering the rental portion of interest/property taxes, navigate to the Your Home section to enter the personal share of the 1098 form.

[Diyana]

@TurboTaxPaulaM Thank you for your help. I can't figure out if TurboTax divides up the mortgage interest and taxes based on the time that I entered it was a rental or if I need to divide it up manually and enter into the correct areas. Can you please clarify?

[PaulaM]

It is a manually adjustment. The software does not allocate in this case. The rental use tool only works if you rented a part of your home, like a room. Allocate like the example in 1st paragraph above.

[Diyana]

Thanks again. What's confusing me is this statement on the Rental Expenses section where you Report Mortgage Interest: "Enter your mortgage interest from Form 1098, Line 1. Check the Qualified Interest box if the mortgage is for your primary home or your vacation home.
TurboTax will allocate your personal portion of qualified interest over to the deduction section for you."

[Diyana]

Also, once we get to AMT and it's asking about mortgage interest - there is a pre-filled amount from schedule A that does not match what I entered.

[MarkAU]

I am doing the same thing. I also found it confusing that the program (online) says they will ask about dividing it up for the rental portion in the rental section, but when you get to the tax break section, there's no reminder to only enter the portion related to when it was not a rental. For me, I entered the whole thing (since I lived in the house before moving out to become both a landlord and renter) but am correcting it now.