Schedule E IRS Pub 527 Worksheet 5-1 Missing

lorhaku — Tue, 01 Apr 2025 16:01:54 GMT

I've already gotten some help with this but am finding more limitations with TurboTax Premier 2024 and a vacation home:

Situation: I have a primary and second home, both homes mortgage combined is >750,000 allowable personal limit which limits me to ~0.6 of all my interest. I also do short term rental of the second home (it IS a second home as I meet the 14 day/10% threshold of personal use). Per IRS Pub 527, worksheet 5-1 there is an ordering of expenses that are allowed to show a loss as well as how they carryover.

I paid ~45k of interest for the second home. I also used the home for 51 days and rented for 33 days.

I think, this is how it is supposed to work:

Normally allowable interest on second home = 27,000 (=45,000 * 0.6)

Schedule E Reported Interest = 27,000 * 33/84 (IRS Method) = 10,607

Schedule A Reported Interest = 27,000 * 51/84 (IRS Method) = 16,393

Now, because I report a LOSS, the allowed 10,607 is allowed, per pub 527 worksheet 5-1, to be a net loss (minus rent). However, since I report the loss, I should also get to claim any unallocated interest in future years from the rental portion of the second home interest, that is:

45,000 * 33/84 = 17,679 (total allocated to rental use)

17,679 - 10,607 (allocated limited interest) = 7,072 --> this should be carried forward to future years since I cannot have a "loss" more than my 10,607 per the IRS Pub 527 worksheet 5-1.

A) Is this all correct?

A1) TurboTax actually applies the whole 17,679 and allows it as a LOSS - I've already confirmed with the programmers this is an error

B) How in the world do I do this on TurboTax Premiere? It looks like the software just flat cannot handle second home mortgages >750,000 that are also rentals creating a net loss. TT doesn't include the worksheet 5-1 from Pub 527 to correctly calculate this. When I try to manually do the work and add it to schedule E, it is all hard coded on the ratios and the schedule E "worksheet" sections so I cannot bring the right values to the right spot.

Re: Schedule E IRS Pub 527 Worksheet 5-1 Missing

DaveF1006 — Tue, 08 Apr 2025 18:00:16 GMT

Yes, it appears your calculations are correct. If TurboTax isn't using the limit correctly, you can do some things to make sure the limit is used correctly.

Manually adjust the rental interest: Since TurboTax incorrectly applies the full 17,679, you may need to override the rental interest deduction to 10,607 in the Schedule E section.
Track the carryforward manually: TurboTax does not automatically carry forward disallowed rental expenses in this scenario. You may need to manually track the 7,072 and apply it in future years.
Use the Forms Mode (Desktop Version): If you're using TurboTax Desktop, you can access Forms Mode, which allows direct entry into Schedule E and Schedule A. This might give you more control over the numbers.

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Schedule E IRS Pub 527 Worksheet 5-1 Missing

Re: Schedule E IRS Pub 527 Worksheet 5-1 Missing