Part year rental - confusion over net income calculation

[jkjlc]

We used home for personal use and rental use during the year and are trying to understand how to properly split expenses/deductions between rental and personal use. 

We’re trying to input our mortgage interest payments to calculate our net rental income.  We are on the Rental and Royalty summary page.  We input our rental income, and then under expenses we’ve input pro-rated property taxes and pro-rated insurance amounts in their respective fields and then on the following page for “Report Mortgage Interest” we input our mortgage interest paid (full year per turbo tax recommendations).

On the Rental and Royalty summary page when turbotax calculates the net income on the rental, it doesn't seem to subtracting all the expenses - specifically mortgage interest payment and taxes to calculate our net income.  

As an example:

Rental Property for 0.5 of year

Income: $1000

Expenses (Property + Insurance, pro-rated): $500

Mortgage Interest: $250  (full-year, Only $125 would be expected to be used towards rental)

Expected Net Income Value: $375

TurboTax Net Income Value: ~$500

Could someone please explain what we are missing?

[DianeW777]

Yes. If you entered the days rented and the days of personal use, then the proration being handled by TurboTax may not be what it should be based on your entries.

If you used the property for personal home and then changed the entire property to fully rental then you should indicate it was rented all year. In the asset you would enter the date it was placed in service for rent and then enter rental income and the already prorated amounts for ALL expenses (includes mortgage interest), Do not let TurboTax do the math. This will provide the accurate net profit or loss from the rental property for the period of the year it was rented.

Please update here if you have additional questions and we will help.