Unfortunately, you will not be able to claim your entire mortgage payment as a rental expense. Only the mortgage interest, mortgage insurance and property taxes related to the rental property are deductible.
The principal that you pay with your mortgage payments is your investment in the property and is considered nondeductible by the IRS. However, you are able to claim a depreciation expense related to the rental property that will increase your rental expenses.
To enter these transaction in TurboTax, log into your tax return and type "rental (schedule e)" in the search bar then select "jump to rental (schedule e)", TurboTax will guide you in entering this information
Alternatively, to enter this transaction in TurboTax Online (for TurboTax Online sign-in, click Here) or Desktop, please follow these steps:
- Once you are in your tax return, click on the “Federal Taxes” tab ("Business" tab in TurboTax Home & Business)
- Next click on “Wages & Income” ("Business Income and Expense" in TurboTax Home & Business)
- Next click on “I’ll choose what I work on”
- Scroll down the screen until to come to the section “Rental Properties and Royalties”
- Choose “Rental Properties and Royalties” and select “start’ (or “update” is you have already worked on this section)
Enter your rental
property information through the TurboTax guided questions (or edit your rental
property if it is already entered) until you come to a screen that is titled,
Your "rental property name" rental summary.
Select to edit your
rental expenses>I'll choose what I work on> click through several screen
until you get to one titled "Report Mortgage Interest". Put your
mortgage interest from Form 1098 here.
Enter your rental property as an asset, you will go through the TurboTax guided questions until you come to a screen that is titled, Your "rental property name" rental summary. You will enter your rental property house here under "assets/depreciation" (see screenshot #1)
- Under the asset/depreciation section - select start
- Select "yes" to "Do you have assets for this property that can be depreciated?
- About 3 screens in, you will enter the house as an asset here. This is where your enter all your rental assets (including capital improvements)
- For the rental house (or any capital improvements), you will select "rental real estate property"
- Then for the rental house, select "Residential Rental Real Estate"
- On the next screen, you will enter information about your Rental property asset including:
- Property description - usually street address
- Cost - generally what you paid for the rental plus the cost of any capital improvements
- Cost of Land - If cost, as listed above, includes land, put the total amount of land cost here (land is not a depreciable asset)
- Date purchased or acquired - this is the original of purchase or acquisition of the rental house.
- On the next screen report purchased new or sold in current year and your business use of the property since acquisition.
- You will then get a screen that will confirm prior year deprecation (If asset is over one year old) Just remember that the IRS assumes that you have taken the correct amount of deprecation on your rental asset regardless of if you did or did not) If you change this amount, TurboTax will calculate a new straight line depreciation amount using the new basis information (cost less prior year depreciation) over the assets remaining life.
- Please note that if you change this prior year (accumulated) depreciation amount from that being generated by TurboTax, your current year's depreciation will be calculated based on the new basis information (cost less newly entered accumulated depreciation) over the remaining life of the asset.
- Then you will get an asset summary page showing current year's deprecation. If you select show detail you can review your entry details (screenshot #2)
- You can add additional rental assets on the next screen by selecting "add an asset" (screenshot #3)
Here is a link that can provide you with helpful information related to your rental property
TurboTax - Tips on Real Estate Taxes and Real Property
