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mefjr
Level 2

Interest deduction on primary residence with rented room

Rented room in primary residence.  Input mortgage interest in rental property income section.  Input mortgage interest in deductions section.  When checking Schedule A, it seems to have placed percentage of  interest from rental section in line 8A, but full amount of mortgage interest in 8B, leading to interest income adding up to more than the total interest reported on 1098.  Should I change the input in deductions section to reflect the total interest minus the rental portion of the interest?

8 Replies
MinhT1
Expert Alumni

Interest deduction on primary residence with rented room

Yes, you should change the mortgage interest and property taxes you claim in Deductions and credits.

 

When you rent out part of your home, common expenses have to be apportioned between personal use and business use (rental) of your home.

 

You need to calculate the percentage of business (rental) use. One common method is to divide the square footage of the rented portion by the total square footage of the house.

In the rental section, you will deduct as rental expenses the rental portion (total costs multiplied by the percentage of business use) of each common cost (such as mortgage interest, property taxes, utilities…). You also claim other costs related to the rental such as repairs and maintenance, etc..

 

In the personal section, you will claim in Itemized deductions the personal use portion of mortgage interest and property taxes.

 

Please read this IRS publication, paragraph on Renting Part of Property on page 16.

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mefjr
Level 2

Interest deduction on primary residence with rented room

Turbotax calculated percentage to be used in rental deduction.  Seems like it should have done same for personal use section.  Thanks for answer.

ColeenD3
Expert Alumni

Interest deduction on primary residence with rented room

It does not. Schedule E and Schedule A information is not linked. This is true for both mortgage interest and property taxes.

OhhTaxes
Level 1

Interest deduction on primary residence with rented room

I think I have the same question as I rent out a room in my condo, but I didn't understand the answer.

 

On TTDeluxe, are you saying I need to deduct the percentage of the condo expenses (mortgage interest, insurance, property taxes) in the "deductions and credits" section that lowered my "rental income"? I.e. would the % of my insurance that was deducted from my overall rental income become double-counted if I listed the full amount in my "Your Home" --> 'Mortgage Interest, Refinancing, and Insurance' section?

AmyC
Expert Alumni

Interest deduction on primary residence with rented room

@OhhTaxes You are filing a sch E for rental income and expenses. See About Schedule E (Form 1040 or 1040-SR), Supplemental Income and Loss.

 

For example: Say you rent out 20% of your home. Then 20% of your insurance, mortgage, utilities, etc would go against the income produced.

 

Insurance is not a tax deduction for a homeowner. Only landlords deduct insurance. So, as in the example above, only 20% of the insurance would be deducted, on sch E. The rest is not deductible.

 

Mortgage interest is deductible. Following the example, 20% on sch E and 80% on sch A, itemized deductions.

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OhhTaxes
Level 1

Interest deduction on primary residence with rented room

Thank you, that makes sense outside of the TT program. I see that the TT program does not make use of the % of dwelling rented out in its calculations.

AmyC
Expert Alumni

Interest deduction on primary residence with rented room

@OhhTaxes Yes the program can be used to calculate that for you.

  1. Edit your rental,
  2. edit general information. 
  3. When you select the type of rental, select Other and the description could be room rented.
  4. Then select under Situations that you rent out part of your home.
  5. Was it rented all year? The personal use refers only to the rented room, not the rest of the place. Enter days the room was rented.
  6. continue through more screens until
  7. Let us Calculate Deductions - choose to do the math or let the program. If you choose the program, it asks for the percentage.
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renelena
Level 2

Interest deduction on primary residence with rented room

I rent out part of my home and when I input the rental expenses information I told TurboTax to do the apportionment calculation based on the rental unit being 20% of my home. For the mortgage interest, TT asked me only for the full amount of the mortgage interest reported to me on Form 1098. I had 2 Form 1098 because I refinanced in 2021.  I entered the combined amount in my rental expenses and TT told me that it was doing the apportionment for my personal deduction. However, when I went to do the Deductions and Credits section of my return, it asked me to enter information from my 1098s. This included information not just just about the amount of mortgage interest reported but about the loan origination date, the principal amount, etc. None of this information was requested at the time I entered my mortgage interest information in the Rental income section, so I assume this was all important information being collected. HOWEVER, once I completed my return I saw that TT appeared to have added the amount of mortgage interest TWICE - the apportioned section calculated under Rental expenses as well as the amount it asked me to enter under Deductions. This is clearly an error. So I deleted all the mortgage interest information  I entered under Deductions. But how is that information (loan origination date, principal, etc.) supposed to now be captured??? BTW, I looked back at my 2020 return and see that TT erroneously calculated my mortgage interest deduction based on exactly the issue I just experienced with the 2021 program.

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