Why does Schedule E not agree with TurboTax inputs?

[JBGoode]

In April 2019 I started renting out a studio apt that is part of my home. The apt was rented for 257 days. Most (except one) of the rental property values in Schedule E are substantially lower than my TurboTax inputs even when proportioning for the days the apt was available for rent. For example, my utility expense input on TurboTax online was $1802...when proportioned for the rented days (multiplied by 257/365) that should be $1269; however, on Schedule E the value is $1104. On the other hand, my property tax was $604 which when proportioned for rented days would be $425: in this case, there is agreement with Schedule E...the value is indeed $425.

If I artificially increase the value of my TurboTax inputs, the Schedule E values become even LESS. Also, some values (maintenance and cleaning) apply only to the studio and the time it was rented (example, window blinds installation) and should not be proportioned, but TurboTax proportions these also. How can I get TurboTax to put the correct values on Schedule E?

[AmeliesUncle · Accepted solution]

Before we get to your actual question, let's check if you did this part correctly ... was the apartment converted to 100% rental, or did it go back and forth between personal and rental use?  If it was converted to 100% rental use, you need to enter ZERO personal days.  If you read the screen carefully, it says you enter the number of personal days AFTER it was converted to a rental.  Then you only enter the amounts for that rental period (which you need to manually prorate the annual items such as mortgage insurance).

As for your actual question, that also has to do with the number of personal days that you enter.  The 'default' method is the IRS method.  For easier numbers, let's say you had 200 rental days and 100 personal days.  The IRS method would be 66.66% rental expenses and 33.33% personals expenses because it does 200 days out of a total of 300 used days.

But if you select the "Tax Court Method", that prorates the rental days over 365 days regards of how many personal days there are.

[Carl]

WHen renting out a part of your residence, you still enter "ZERO" personal use days. That's because it's asking how many days you used the "rental portion" for personal use. So if you did not use the rental portion that is exclusive to the renter, then you have zero percent personal use days, and ONE HUNDRED PERCENT business use of that space.

While mortgage interest, property insurance and property taxes is split based on the date the rental portion was place in service, and the percentage of space that is exlusive to the renter, you can split utility costs the same way if you want.

Utilities can also be split based on the total number of people living in the house too, if you want. Sometimes that's more beneficial. For example, if you, your spouse and two kids live in the house, and you rent out one room to a single person, that room may only occupy 10% of the total floor space. But with a total of 5 people living in the house, you can apply 20% of the utility expenses to the rental portion.

There is one exception though, and i have no idea why the IRS singles this one out. If the home only has one telephone line then you can "NOT" allocate one single penny of the phone bill to the SCH E. For all the other utilities, they must be available to the tenant. So if there's not a cable TV drop in the space that is exclusive to the renter, you can't apportion part of the cable bill to the SCH E. Weather the tenant actually uses that cable drop or not doesn't matter. So long as it's functional and available for their excursive use, you can claim it.