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Rental expense deduction limit

I have a rental property that started to rent out 2017 December. And I paid more than 1000 for cleaning, repair, etc. After I enter that cost, Turbotax shows only 260 for deduct. Wondering if that is because I hit some rental expense deduction limit?
5 Replies
Level 15

Rental expense deduction limit

Rental income is passive income. Rental expenses are also passive expenses. You can only deduct your rental expenses, up to your rental income. Once your rental deductions get your taxable rental income to zero, that's it. Any excess is carried over to the next year.
Now understand that it is not at all uncommon for the carry over expenses to increase each year and continue to carry over year-to-year as they grow.

" I paid more than 1000 for cleaning, repair, etc."

Expenses incurred prior to the property being placed "in service" are not deductible. Also, since this is your first year renting property, make absotively positutely certain that your numbers are spot on PERFECT. Mistakes tend you grow exponentially year to year. Then when you catch that mistake years down the road (assuming the IRS doesn't catch it first) the cost of fixing that mistake will be $EXPENSIVE$.

I'm providing you the below for reference, as I'm sure you'll find it informative, educational and helpful as a first time landlord.

Rental Property Dates & Numbers That Matter.

Date of Conversion - If this was your primary residence before, then this date is the day AFTER  you moved out.
In Service Date - This is the date a renter "could" have moved in. Usually, this date is the day you put the FOR RENT sign in the front yard.
Number of days Rented - the day count for this starts from the first day a renter "could" have moved in. That should be your "in service" date if you were asked for that. vacant periods between renters count also PROVIDED you did not live in the house for one single day during said period of vacancy.
Days of Personal Use - This number will be a big fat ZERO. Read the screen. It's asking for the number of days you lived in the property AFTER you converted it to a rental. I seriously doubt (though it is possible) that you lived in the house (or space, if renting a part of your home) as your primary residence or 2nd home, after you converted it to a rental.
Business Use Percentage. 100%. I'll put that in words so there's no doubt I didn't make a typo here. One Hundred Percent. After you converted this property or space to rental use, it was one hundred percent business use. What you used it for prior to the date of conversion doesn't count.


Property Improvement.

Property improvements are expenses you incur that add value to the property. Expenses for this are entered in the Assets/Depreciation section and depreciated over time. Property improvements can be done at any time after your initial purchase of the property. It does not matter if it was your residence or a rental at the time of the improvement. It still adds value to the property.

To be classified as a property improvement, two criteria must be met:

1) The improvement must become "a material part of" the property. For example, remodeling the bathroom, new cabinets or appliances in the kitchen. New carpet. Replacing that old Central Air unit.

2) The improvement must add "real" value to the property. In other words, when  the property is appraised by a qualified, certified, licensed property appraiser, he will appraise it at a higher value, than he would have without the improvements.

Cleaning & Maintenance

Those expenses incurred to maintain the rental property and it's assets in the useable condition the property and/or asset was designed and intended for. Routine cleaning and maintenance expenses are only deductible if they are incurred while the property is classified as a rental. Cleaning and maintenance expenses incurred in the process of preparing the property for rent are not deductible.


Those expenses incurred to return the property or it's assets to the same useable condition they were in, prior to the event that caused the property or asset to be unusable. Repair expenses incurred are only deductible if incurred while the property is classified as a rental. Repair costs incurred in the process of preparing the property for rent are not deductible.

Additional clarifications: Painting a room does not qualify as a property improvement. While the paint does become “a material part of” the property, from the perspective of a property appraiser, it doesn’t add “real value” to the property.

However, when you do something like convert the garage into a 3rd bedroom for example, making a  2 bedroom house into a 3 bedroom house adds “real value”. Of course, when you convert the garage to a bedroom, you’re going to paint it. But you will include the cost of painting as a part of the property improvement – not an expense separate from it.

Returning Member

Rental expense deduction limit

CARL - I moved out of my primary residence and rented it to my family. I still pay a mortgage loan on the house, but don't see a section where I can enter that amount into TurboTax to deduct from the amount they pay for rent. How do I deduct this from the amount they pay for rent?

Level 15

Rental expense deduction limit

I moved out of my primary residence and rented it to my family.

Only to a certain extent, it doesn't matter who you rented it to. But the fact it's a relative "could" impact your carry over losses if you are not renting the property at FMRV.

I still pay a mortgage loan on the house, but don't see a section where I can enter that amount into TurboTax to deduct from the amount they pay for rent.

Your entire mortgage payment is not deductible under any circumstances and with no exceptions. It never has been, is not now and never will be. You can only claim/deduct the mortgage interest you paid, which is reported in box 1 of the 1098 - Mortgage Interest Statement you received from your lender.

When you convert your primary residence to a rental, I can't seem to stress enough to folks how super duper ultra important it is to work through the program the way it is designed and intended to be used, and to *read* *the* *small* *print* because it really does matter, big time.  Paying attention to detail on each screen is also important, as there is a huge difference between "select all that apply" and "select the one that applies".

When converting personal use property (such as your primary residence or a 2nd home) to rental property, if you use the protram the way it's designed and intended to be used, it will do the splits *for you*. For example, your mortgage interest is all deductible. However, that percentage of mortgage interest paid while the property was a rental will be reported/deducted on SCH E. The remaining amount will be claimed on SCH A as an itemized deduction. The program will also do this automatically for your property taxes.

However (and this is why the small print matters) it will not do this for the property insurance. You can only deduct that percentage of the property insurance you paid for the year, that is equal to the percentage of time it was classified as a rental for that year. That portion of your propery taxes paid for the period of time it was personal use property is just flat out not deductible anywhere, ever.

If you'll take a look in the Rental & Royalty Income (SCH E) section of the program and start working it through, after you enter your rental income and expenses (which will include mortgage interest, property taxes and insurance) the next section will be Assets/Depreciation.

At an absolute minimum the entire property itself will be listed in the assets/deprecation section. If it is not, then you "MUST" click the Add An Asset button to add the property itself and pay attention to detail as you work it through.

If you do all this correctly, then when you get to the "Your Home" section under the Deductions & Credits tab, you will see that the portion of property taxes and mortgage interest has already be allocated and entered for you ****IF**** you elected the option to have the program do the splits for you, automatically.

I know I've provided a lot of information here. But the important thing is, have I answered your question? I think I have, but like to be sure.

Returning Member

Rental expense deduction limit

I had to replace siding on two sides of my rental property due to rot. Is that a repair or a depreciation?

Expert Alumni

Rental expense deduction limit

The answer to that question is a bit of a judgment call. 


If all siding had been replaced, then it would be definitely be considered an improvement that would be depreciated over time.  Even replacing some of the siding would meet the definition of an improvement if it results in a betterment to the property or restores it.  


You are the best judge to determine whether the extent of the work done would be an improvement or just a repair.  




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