I've always found the TurboTax Basic CD version good enough for doing my taxes and handling the capital gains and losses from my mutual fund accounts, K-1 worksheets, etc. This year I bought a rental property and will need to do Schedule E, supplemental income and loss from rental real estate. I don't have all my tax information yet, but I did some preliminary work on my taxes and TurboTax Basic took me through the Q&A for Schedule E and calculated the depreciation amount for my rental.
TurboTax keeps prompting me to upgrade to Premier for an additional $60. It promises additional help in maximizing 350+ deductions and credits and says it will help me uncover additional rental property deductions and credits. I wonder if this is true, or is it just a bunch of bells and whistles that won't really provide any real additional benefit?
As a first time landlord, I recommend at least the Deluxe version. It did me fine for a few years. I upgraded years later to the HOme & Business version, because I'm self-employed and found the higher version to be better for my self-employment income. The additional help it provided for the SCH E stuff was just an added benny to me.
As a first time landlord, you will find the below extremely helpful. But if you have any questions on the SCH E stuff, just ask. Been a landlord for 25+ years now, and have learned quite a lot in that time.
RENTAL POPERTY ASSETS, MAINTENANCE/CLEANING/REPAIRS DEFINED
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 classified as cleaning/maintenance costs. They are instead classified as startup costs, amortized as such and depreciated over time.
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 classified as startup costs, amortized as such and depreciated over time.
Please note that if residential rental income is not your PRIMARY business, and your PRIMARY source of income, then your rental business is considered to be passive, and you flat out, no way, no how , are not allowed to deduct your startup costs. Period. The IRS says so. See https://www.irs.gov/pub/irs-drop/rr-99-23.pdf and please take note that rental property produces “passive” income, while other types of businesses produce “active” income. Your rental property is not classified as your “active” business, unless you are a real estate professional, an active participant in the management of the property, and it provides a substantial (more than half) amount of your taxable income for the year. All three requirements must be met. There are no exceptions
Start up costs are expenses incurred while preparing the property for rent, with the express purpose being to prepare it for rent, before it is available for rent. These costs do include repair, cleaning and non-recurring maintenance cost. It does NOT include property improvements. With a normal business that produces active income (rental income is passive) you would amortize these costs over 15 years. But you can’t do that with a rental property. However, you can deduct a maximum of $5000 in startup costs in the first year the rental is available for rent, PROVIDED your total startup costs do not exeed $50,000. This is reported on line 18, “Other Expenses” of SCH E, and should be labeled “start up expenses”.
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.
Compare the differences in order to make the best choice. Scroll down to the bottom of the page and click "forms". It will show you all the forms that each version handles.
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I rehabed a rental unit - after 20 years needed new flooring, new Combi boiler plus installation, interior / exterior paint and gutter repairs. I am just not sure what is maintenance and/or need to be costed out over a period of time.
My experience is that the upgrade to Premium is mostly bells and whistles.
Try this experiment: Buy the disk/download version of TT Deluxe and install it on your computer and prepare your taxes.
Now go to https://turbotax.intuit.com/personal-taxes/compare/online/ and do your taxes using Premium online. You don't have to pay until you file. Compare the amount of taxes owed between the two versions.
When I did this the amount I would save using Premier was less than the cost of the upgrade.
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