discrepancy in my Turbotax 2020 rental reporting calculation

[LP1968]

Please advise why TurboTax is not allowing the total of my rental in 2020 to go negative despite the fact that my expenses are (much!) more than the rent received in 2020. 

This is particularly noteworthy because last year TurboTax allowed the 2019 total for the same rental property to go negative (specifically -$13). This is also  visible in the 2-year comparison at the end of the rental analysis for 2020. 

More specifically, I noticed that for 2020 TurboTax caps the expenses of this rental to the amount of rent income, and then also zeros out the property depreciation amount (despite calculating the property depreciation amount to be exactly the same like last year). 

 So, I assume that I am doing something wrong this year. 

Also, please note that this is about AirBnB rental income from my own residence. So, I understand that this passive activity loss, although not applicable for this year, may be applicable in the future. correct? 

[Critter-3]

You may have done something wrong last year if you are renting out the home you also live in ... this is considered a "vacation" rental and as such the expenses cannot exceed the current year income.  Unallowed losses are carried forward.   

I highly recommend you seek local professional guidance,  contact TT support  or upgrade to one of the LIVE options to get one on one assistance.  

[LP1968]

Thanks for the prompt response! let me clarify (as I may have confused you): 

I just want to make sure that (as you too state) "Unallowed losses are carried forward." For last year, I know that -$13 was carried forward, but for this year it shows zero. So, how can I check in TT that my loss is calculated correctly and will be carried forward"? 

otherwise, yes, I am aware that "expenses cannot exceed the current year income" (as you suggest). For example, last year the negative amount (specifically -$13)  did not reduce my income.  

Thanks again. 

[Carl]

If you told the program that you are renting below fair market rental value (most common when renting to family) then your deductible expenses are limited to the amount of rental income received, and carry over losses are not allowed. Any carry overs are just lost, permanently. This would include carry overs from previous years too.

So work it back through and confirm you answered the questions correctly concerning renting to family, and renting at FMRV. Additionally, if a vacation rental where you only rented out for a single short period during the year, the same may apply to that scenario also, depending on the specifics.

[tagteam]

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@Carl wrote:

If you told the program that you are renting below fair market rental value (most common when renting to family) then your deductible expenses are limited to the amount of rental income received...

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Per Section 280A, every day the property is rented a below fair rental constitutes a day of personal use. 

As such, the only expenses that can potentially be deducted are mortgage interest, property taxes, and casualty losses (all on Schedule A).

[LP1968]

Thanks a lot Carl! yes, i think this is it! 

So, how can I make sure that TT is not assuming that that I rent below FMRV?  

Because I only rented 1 bedroom in my house for the 4-5 weeks in 2020 I was traveling, I suppose TT thinks that my yearly rental income is below FMRV. 

For example, according to TT "Median Rent results" the for a 2 bedroom in my county the monthly is $3,477... but I am not sure for example, how TT knows how that my house is a 2 (vs 1) bedroom...

please advise! 

[tagteam]

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@LP1968 wrote:

Because I only rented 1 bedroom in my house.....

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@LP1968 

Did you answer the questions (check the boxes) on the following screens in the Property Profile section of the program?

[LP1968]

yes, both are checked... and they are also both same as in 2019, which was my first year of renting and in which TT had allowed passive activity loss carryover (of -$13), unlike in this tax return. 

what else can I check to make sure that TT does not think that my rental was below FMRV? 

Thanks again! 

[tagteam]

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@LP1968 wrote:

what else can I check to make sure that TT does not think that my rental was below FMRV? 

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There is another checkbox on a subsequent screen that asks if, during the time the property was a rental, the property was always rented at a fair rental price.

[LP1968]

that's the question I am missing! somehow, I do not get that question. How can I get into the question? 

should i look for it under "Property Profile" or "Rental Income" in the TT overview screen named "Review of your XXX Rental Summary"?

Thank you very much for replying again! 

[tagteam]

@LP1968 

You will find the screen in Property Profile. 

You will first be asked whether the property was rented all year. 

[LP1968]

Yes, I am asked "Was this property rented for all 2020" ... 

and I respond "No, this property was not..." and then...

I declare the number of "days rented at a fair market price" (which is 23), and the number of days of "personal use..." (which is 302, as the remaining 40 days the house was listed  for rent but vacant)... 

is this correct? ... if so, should TT allow my passive activity loss to go negative  and be carried over to next year (like in 2019) instead of capping it to zero? 

Thanks again!

[Carl]

is this correct?

No. As an example, if the property was converted from personal use to rental use on Dec 1st and remained a rental for the rest of the year, then:

Was this property rented all year?  YES

Days rented:  31

Days personal use: ZERO

What the property was used for while it was "not" classified as a rental does not count for anything what-so-ever. Now if I did use the property for any personal use between Dec 1st and Dec 31st, then my days rented and days of personal use *must* add up to 31 or less.

In the desktop version of the program, the small print does try to make that clear. For some, they interpret it correctly. Others just flat out don't read that small print at all.

[tagteam]

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@Carl wrote:

Was this property rented all year?  YES

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The property was not rented all year. @LP1968 stated, "I only rented 1 bedroom in my house for the 4-5 weeks in 2020 I was traveling".

[Carl]

If the property was converted to rental in 2020, then converted back to personal use in that same tax year, then the only days that count for anything, is the days it was classified as a rental. Days it was not classified as a rental, count for nothing.

With the numbers being used, the OP is saying the property was classified as a rental for the entire 365 day year. If so, their numbers are correct. Otherwise, their numbers are wrong.