Should I enter the full amount of property taxes, mortgage interest, expenses in rental expense or the prorated amount for a rental that I used also for personal use?

[yoyo63]

I know the IRS rules, but I don't understand if Turbotax does the proration calculation, based on number of days rented/personal use that I already entered.

[Carl]

For your situation, you really need more clarification from the program itself, so that you make correct selections and enter correct data. Without that clarification, it's quite easy to make a mistake and not even realize you've done so. Here's the clarification. Work it back through to make sure your data is entered correctly, using the clarified guidance below. If you need further help, please let me know if 2020 is your first year renting the property out. It matters, so that I don't give you incorrect or inaccurate information.

Rental Property Dates & Numbers That Matter.

Date of Conversion - If this was your primary residence or 2^nd home before, then this date is the day AFTER you moved out, or the date you decided to lease the property – whichever is later.
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 (or use the rented portion of house for personal use) for one single day, for any type of personal pleasure use 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 (or used the rented portion for personal use) 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, 2nd home, or any other personal use reasons 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.

[yoyo63]

From your response, it seems you don't understand my question. However, in answer to your direct question, 2020 is not the first year I have used my vacation home as both a rental and personal uses.  My biggest question is about how TurboTax apportions property taxes, and where and how I enter property taxes paid on this vacation home rental and on my primary residence, which is fully paid off, therefore, I have no 1098 form for my primary residence. Currently, TurboTax is showing more property tax than what I paid in total, apparently by double counting the portion attributable to my rental property. But I see no place to enter the portion of property taxes attributable to person use of my vacation home.

[Carl]

From your response, it seems you don't understand my question.

No argument there.

TurboTax is showing more property tax than what I paid in total, apparently by double counting the portion attributable to my rental property.

My assumption here is that it's apportioning the correct amount on the SCH E, but applying the entire amount on SCH A. Thus, "double counting" the rental portion.

- From my testing a few weeks ago of different scenarios, it seems that the program is not treating the "property tax" expense entered in the rental expenses section, separately and correctly as it should from other expenses entered in that section. In my scenario with 50% business use and 50% personal use and a property tax of $1000, it was correctly attributing $500 to the SCH E, just like it did for all other expenses. But then it was attributing the full $1000 to SCH A. The only way I could get things right, was to do the splits manually.

I notified the Devs of this issue about 2 weeks or more ago, and at their request sent them my testing file. Haven't heard anything since, and from what I can tell in the latest update I installed 2 days ago, the issue is not fixed.

Also note that typically the devs will not respond to update requests on an issue. If they did that for every update request, then they'd never have any time to actually address the issue. So hopefully the next update will take care it. Won't know until the update comes out.

[yoyo63]

Ah, thank you for this excellent response, Carl!  Regarding your comment, "The only way I could get things right, was to do the splits manually." I wonder if you can tell me how to manually enter my property tax data on Schedule A?  Also, if I am using the online version of TT, are the updates automatically incorporated each time I log in and work in TT, or do I have to do something to get the updated version?

[Carl]

wonder if you can tell me how to manually enter my property tax data on Schedule A?

After you "figure the splits" on the mortgage interest and property taxes, you're SCH A portion will be entered under the Deductions & Credits tab in the 'Your Home" section.

Under the "Your Home" section elect to update the one for Mortgage Interest.

Enter the prorated amount there. As to exactly what screens you'll see, I can't say exactly because it depends on what may or may not already be in that section. You can enter it as you enter the 1098 for your primary residence, in the box for "other interest". Or you can make it a completely new 1098 entry, and you'll show two 1098's listed in that section then.

The same holds true for the "property taxes" section under "Your Home" You just enter the total amount of property taxes paid on all personal use property.

In the end, all the IRS will see is the total mortgage interest claimed on all "personal use" property on line 8 of the SCH A, and the total of all property taxes paid on personal use property gets included on line 5b of the SCH A.

As a reminder, while you claimed your pro-rated property insurance on the SCH E, the difference is not deductible at all on the SCH A. That's because property insurance is never deductible on "personal use" property.

I"m assuming you already know about pro-rating all of your rental expenses.

For example, it was classified as a rental from 7/1/2020 through 12/31/2020 which is 182 days. During that 182 days the property was personal use for one month, or 30 days. Now 30 days is 16% of the 182 days it was classified as a rental.

So you add up all your electric bills for the billing period between 7/1/2020 and 12/31/2020. Lets say the amount totals $1000 for those 6 months. That means 16% of that $1000 is personal use. Now we know that 16% of $1000 is $160. So $1000 minus $160 is $840, and thats what you claim for utilities on the SCH E.