Why does the more expenses I include in the questions for rental property drove UP the Federal Tax Due amount in TurboTax Premier?

[henry_law]

Why does the more expensse I include in the questions for rental property drove UP the Federal Tax Due amount in TurboTax Premier?  This is baffling.

I have two rental properties.  One has a profit and the second is currently taking a lost.   After I put in all the expenses for each property, I have an amount Total tax due of $3,175.  I decided to play around with adding more expenses, and I noticed that my Tax due went up.  When I removed all the expenses, both properties either show a profit or a larger profit, but the Tax Due went down to $2,765.  One would think that if I have more profit from the rental properties, I pay more taxes, and not less.  I'm totally baffled.

Can anyone help explain this?  Why would I want to report my expenses if it causes me to pay more taxes.

[AnnetteB · Accepted solution]

If you have indicated that your rental property income is Qualified Business Income (QBI), then the QBI deduction combined with the changes in your overall income from the property is causing the changes in your balance due.

Take a look at the information below to be sure whether your rentals qualify to be QBI.

https://ttlc.intuit.com/replies/7122193

[henry_law]

Thank you Annette.  I think I came to the same conclusion last night after doing some digging.  I didn't even realized that I chosen QBI during the TT interview process, I think TT chose that for me.   For those that don't fully understand my situation, here is a short explanation that might help others.   My income was over $150K so I couldn't take any of the passive loses (expenses) from the rental properties so it didn't help reduce my tax liability.  But it did the reverse instead.  For any additional expense I put in, it reduced my profit on the property and thus reduce my 20% QBI deduction.   In other words, the more I made from the property, the bigger the deduction thus reducing my tax liability.  This sounds counter intuitive, but this is what I think folks that have higher earned income (ie. W2) with rental properties are facing.

[trevi34]

Thank you @henry_law and @AnnetteB for posting the solution, I made the same mistake.