Do I report Mortgage interest for Rental Property as rental expense or an itemized deduction?

[stlmama]

This answer string appears to be the most correct.  TurboTax DOES NOT enter an adjusted mortgage interest amount in Schedule A for the personal use portion of a rental property.  I followed the advice in this string and did my own pro-ration for Schedule A, checking the box that states the amount differs from the 1098 and adding the requested note on the next screen explaining why.  I do find it odd that TurboTax not only does the proration for the real estate taxes, but gives you bold reminders that it has done so; however, the app does not do the same for mortgage interest.

[LeonardS]

You will report the mortgage interest as an expense for a property that is used solely as a rental.  It is not reported as an itemized deduction. 

[jianzhi623]

"To be clear,  I rented a room (10% of sq ft) in my house for 95 days in 2019. "

Question, so if any expense (x) put is for the entire year (say property tax), the correct portion to be put to schedule E should be x * 10% * (95/365) ?

[JohnB5677]

You are correct.  The 10% accounts for the square footage, and the (95/365) accounts for the time it was rented.

[1jerome1]

where do I report Mortgage interest for Rental Property as rental expense or an itemized deduction?

[LeonardS]

You will report the mortgage interest for your rental property as a expense.

[bruingao]

Where do I enter (and what percentage of) mortgage interest and property tax if my main residence is partially rented (67% rented, 33% personal)? Rental expenses, or deductions?

[DianeC958]

You would enter this information for the rental portion of your house

1. In TurboTax, search for rentals and then click the "Jump to" link in the search result.
2. Answer Yes to the question Did you have any rental or royalty income and expenses?
3. Follow the on-screen instructions as you proceed through the rental and royalties section.
   • We'll first ask you to enter general information about your rental (description, address, ownership percentage, etc.) 
   • Eventually, you'll come to the Rental Summary screen which is where you enter your rental income and expenses, assets and depreciation, and vehicle expenses.

If 67% of your personal residence is rented, then you can deduct 67% of the mortgage interest, property taxes, utilities, internet, etc.  You can also depreciated 67% of the cost of the house.

The other 33% of the house you enter the property taxes and mortgage interest in the Deductions and Credits, Your Home, Mortgage Interest, in TurboTax.

@bruingao

[mivey74]

If you have the tricky case of multiple renters moving in at different times, and only occupying let's say an average over the year of 20% of your home that you also live in:

* Under TurboTax Wages and Income, select Rental Properties and Royalties - answer questions from the first two screens, then Edit (or Add if first time entering):
   - Select Property Profile, answer 3 screens of questions, then say Yes, property was rented all year, answer next screen, then say No, I'll do the math. Then click through rest of Property Profile, then:
   - Select Rental Income section - enter the Rental income.
   - Select Expenses section - select Walk me through everything. Then just enter 20% of your expenses for each of Advertising, Utility, Mortgage Interest, Real Estate taxes, etc. (and include Electricity/Gas, Water, Internet, Cable TV, Netflix in Utilities (my Garbage and Sewage are in my Real Estate (Property) Tax)).
* Under Deductions section (not Rental section) - Enter 80% of the Mortgage interest under the Mortgage interest section (and don't enter any Property tax under the Mortgage interest section), and 80% of the Property Tax under the Real Estate tax section.

* Check your Schedule A and Schedule E when you print your taxes, to verify - it should show 80% of your Property Tax and Mortgage interest in Schedule A, and 20% in Schedule E.

[woshigagou]

I have a house that I rented out last year.  To get a zero income result on Schedule E it will be enough to include the real estate tax and the depreciation as my rental expenses (which would exceed the rental income).  But I still have additional mortgage interests which, if reported on Schedule E, will not change the bottom line for me.  My question is, may I report this mortgage interest on Schedule A?  This is in relation to your message below where you said "you are only allowed an itemized deduction for your main house and ONE additional residence".  This is the ONE additional residence indeed.  If I can, it would add up my Schedule A figure so that it will be a good choice to itemize (rather than take the standard deduction).  Thank you very much.    [FYI, the house will be for my second home next year when I move between 2 cities.]

[DaveF1006]

One additional residence does not include rental homes. It includes second homes you use as personal residences. When it becomes your second home is when you can deduct it as a Schedule A itemized expense.

[woshigagou]

so, in other words, I should deduct the mortgage interests in question only on Schedule E this year, and keep the extra negative figures (losses) as carryovers for potential future use, right?

Thank you.

[AmyC]

@woshigagou You want to claim all expenses for the year. I am assuming you have income over $150,000 to not be allowed the rental loss. However, all those losses add up and will add to your basis when you sell the house. You do not want to lose those critical expenses. You just need to keep up with your carryover losses. Our program does that for you but it is also good to keep that page in your financial notebook.

[tom_guyette]

I really want to know the answer to this too. I'm losing out on a large chunk of Schedule A mortgage interest and taxes because other Schedule E expenses already bring my room rental income below 0.

Is there a way to arrange my return so I get those lost deductions back, or does the IRS consider that to simply be a consequence of being mildly in the rental business?

[LeonardS]

Mortgage interest for rental properties is deducted as an expense on Schedule E  they are not an itemized deduction on Schedule A.  When your rental income is below 0 you have a passive loss that can be used to offset future passive income.  These losses are carried forward until they are used up.  If you have passive losses when you sell the rental property you will use the passive losses to reduce your profit from the sale.

If you did not deduct the mortgage interest as an expense in prior years you may file amended returns for the previous 3 years to correctly expense the mortgage interest. See this TurboTax link for information on amending tax returns https://How to amend (change or correct) a return you've already filed