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geraldboesche320
Returning Member

Rental Property

I have a single rental property.  When I enter the rental income from that property, my federal and state income taxes go down using Turbo Tax.  When I start entering expenses, the taxes go up.  Shouldn't this be the other way around?  Income - taxes go up?  Expenses - taxes go down?

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2 Replies
Carl
Level 15

Rental Property

you need to stop concerning yourself with the changing number until you hae completed your tax return completely. That changing number serves one purpose, and one purpose only. It tells you "the program did something". Nothing more, nothing less.

That number is going to be all over the place, up, down, left, right, inside, outside, as you work through the program. It means absolutely nothing to you or anyone else until you've worked through the program completely.

There are literally hundreds, if not thousands of things that can and will affect your tax liability. For starters, remember that the program can only work with the data you have entered "AT THAT SPECIFIC AND EXPLICIT POINT IN TIME" 

For example, when you have a married couple where one has a W-2 job and the other is self-employed,  if the business of the self-employed person shows a loss in the end, then that marrried couple will not qualify for the child care tax credit, meaning they get no credit for child care expenses. Not a penny. In such a situation, for the parents to qualify for that credit they must *both* have taxable income. So if the self-employed spouse has no taxable income becuase their business operated at a loss that tax year, they just don't get the $3,000 maximum child care tax credit.

One guess is that as you enter your rental expenses and it starts reducing your taxable income, you get to a point where you don't qualify for the EIC. Therefore, your tax liability will go up. But then later, you may enter data elsewhere in the program that will once again, qualify you for the EIC.

So the bottom line is, that number is of absolutely no value to you until you have completed your tax return in it's entirety.

 

geraldboesche320
Returning Member

Rental Property

Thank You for your reply.  I think that is the case.

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