Why does rental property repair expense increases tax due?

[y_kenny]

In TurboTax Home and Business 2018, under Business tab, [Enter common expenses] for a property, if i enter an amount for [Repairs], say $2000, the federal tax due amount increase by 5% of the repair amount, $100, the state due also increases. The property has net income to begin with. 

This is the case for another property that has net income.

This makes no sense and prohibits/penalizes entering repair expenses. How does Turbotax handle rental property repair expenses?

Please let me know what I am doing wrong.

[Anita01 · Accepted solution]

When you enter an amount, it changes the Adjusted Gross Income in your return.  It may decrease a credit based on income, for example.  The only way to see what actually is changing is to look at your 1040 before and after entering the expense.  Since you are using Desktop, that's easy to do.  Click on the Forms icon and then click on the 1040 to open the 1040 in your return.

[y_kenny]

I followed the advice and checked F1040 after I entered rental property expenses: on 1040, the affected box is 9, Qualified Business Income Deduction, from Sch E. I traced to Sch E to see that the QBI dropped.   The deduction is 20% of QBI. The more profit in QBI, the more deduction, the less total tax due. This is per Sec 199A of the Tax Cuts and Jobs Act. It encourages making money from outside employment.

[Karen314]

This is due to the QBI deduction when your net rental income is positive before NOL but then wiped out by NOL.  If your NOL is eliminating your rental income, reducing your rental income further - by entering expenses - will not reduce your tax.  However, the 20 percent QBI is BEFORE application of loss carryforward -therefore that QBI deduction is reduced as your net rental income before NOL is reduced - so reduced deduction, higher AGI.  If you expect to have rental income next year, it is worthwhile to enter all expenses, as your NOL will be higher, even if your QBI this year is lower.