Help please! I rented a room in my primary residence for 90 days in 2021 and then converted it to personal use. I have gotten lost in this community trying to figure out first on the online Premier version of TurboTax and now on the desktop Mac version:
Thank you for any help! I spent more than an hour on the phone with two different TurboTax support specialists and they kept trying to make me buy the most expensive version of their product which makes me think TurboTax cannot file for this use case correctly without someone on their side editing the forms. I would love to be proved wrong!
TurboTax will not do both calculations that are required for your situation.
TurboTax will prorate your expenses such as property tax and mortgage interest according to the portion of your property that was used as a rental. In your case, the amounts for property tax and mortgage interest that you enter in Schedule E will be prorated by 25% since you rented 25% of your home.
The 90 days of rental use before you converted the space to personal use only is not taken into account by the program. You will need to do that calculation yourself before you enter the amounts into Schedule E.
Here is an example to try to explain what your inputs should be. Start with Schedule E first. Be sure to check the boxes in the Property Profile section stating that you rent part of your home and that you converted the rental to personal use. Enter the number of days the space was rented, but be sure that personal use days are zero. You do not count the days after you convert it. So at the end of the 90 days, you cease to have a rental property.
As you go through your Schedule E expenses, you have to consider expenses that only apply to the 90 days that the space was a rental. Therefore, when you are entering items such as property tax and mortgage interest, you would only enter 90/365 or 24.657% of the total for the year. TurboTax will then prorate that amount by 25% of the property that was used as a rental. The remaining 75% of the number you enter will be automatically reported on Schedule A.
Then, when you go to Schedule A, you will see an amount on the screen that has been brought over from Schedule E. You will enter the remaining 75.343% of the total property tax and mortgage interest. Enter all of the other information from your Form 1098 for your mortgage interest, except change the total interest amount to be the prorated figure.
For example, suppose you rented 25% of your house for 25% of the year (instead of 90 days). If you had $1000 in property tax and $4000 in mortgage interest, on Schedule E you would enter $250 for the property tax and $1000 for the mortgage interest. This amount represents 25% of the year while you had a rental property. TurboTax will prorate those amounts by 25% for the portion of your home that was being rented and report $63 for property tax and $250 for mortgage interest on Schedule E as a rental expense.
The remaining $187 and $750 will be transferred to Schedule A. You will enter the other 75% of the year's taxes and interest on Schedule A, $750 for property tax and $3000 for mortgage interest.
It is best if you go through the step-by-step process to enter your information. Entering information directly in Forms Mode is not recommended unless absolutely necessary for the situation.
TurboTax will not do both calculations that are required for your situation.
TurboTax will prorate your expenses such as property tax and mortgage interest according to the portion of your property that was used as a rental. In your case, the amounts for property tax and mortgage interest that you enter in Schedule E will be prorated by 25% since you rented 25% of your home.
The 90 days of rental use before you converted the space to personal use only is not taken into account by the program. You will need to do that calculation yourself before you enter the amounts into Schedule E.
Here is an example to try to explain what your inputs should be. Start with Schedule E first. Be sure to check the boxes in the Property Profile section stating that you rent part of your home and that you converted the rental to personal use. Enter the number of days the space was rented, but be sure that personal use days are zero. You do not count the days after you convert it. So at the end of the 90 days, you cease to have a rental property.
As you go through your Schedule E expenses, you have to consider expenses that only apply to the 90 days that the space was a rental. Therefore, when you are entering items such as property tax and mortgage interest, you would only enter 90/365 or 24.657% of the total for the year. TurboTax will then prorate that amount by 25% of the property that was used as a rental. The remaining 75% of the number you enter will be automatically reported on Schedule A.
Then, when you go to Schedule A, you will see an amount on the screen that has been brought over from Schedule E. You will enter the remaining 75.343% of the total property tax and mortgage interest. Enter all of the other information from your Form 1098 for your mortgage interest, except change the total interest amount to be the prorated figure.
For example, suppose you rented 25% of your house for 25% of the year (instead of 90 days). If you had $1000 in property tax and $4000 in mortgage interest, on Schedule E you would enter $250 for the property tax and $1000 for the mortgage interest. This amount represents 25% of the year while you had a rental property. TurboTax will prorate those amounts by 25% for the portion of your home that was being rented and report $63 for property tax and $250 for mortgage interest on Schedule E as a rental expense.
The remaining $187 and $750 will be transferred to Schedule A. You will enter the other 75% of the year's taxes and interest on Schedule A, $750 for property tax and $3000 for mortgage interest.
It is best if you go through the step-by-step process to enter your information. Entering information directly in Forms Mode is not recommended unless absolutely necessary for the situation.