Property tax is not shown in full amount on my Rental Properties and Royalties (Sch E) [Expenses] and not shown in full on Deductions & Credits section [Property (Real Estate) Taxes]

[Jack7777]

Hello, Tax experts. I need help with my Property tax under Rental Properties and Royalties (Sch E)  and the Deductions & Credits section.

(Edited) I rented my whole house out started 1July last year (personal use 1Jan-20Jun). I entered my rental income under Wages&Income --> Rental Properties and Royalties (Sch E).  I also entered 'Real estate taxes' $8,740 from 1098 as expenses.  but 1. my property tax under expenses is only shown as $4,517 (See attachment 1), why is that?   2. When I moved to the Deductions & Credits section. My Property (Real Estate) Taxe is only shown as $4,223 instead of $8,740.  it also said 

We already deducted the personal portion of your property taxes from your rental property in the amount of $4223.00, so don't enter that amount here"            (See attachment 2).

My question is why is only $4,517 or $4,223  instead of  $8,740 on my 1098? Should I enter the difference to match with $8,740 or should I just leave it because now it's a rental property, not a primary home anymore?

Thank you in advance!

      

[Critter-3]

Return to the Sch E entry section ... did you enter any personal use days ?   If it was only a rental all of 2021 then your personal use days should be zero. 

[Jack7777]

Sorry for not explaining my situation very clearly. I rented out started on 1July 2021. So I did put down personal used days. (1Jan-20Jun). Is this have something to do with why the property tax is not shown in full? Thank you. 

[Critter-3]

Yes ... if it was a rental for only part of the year then only part of the common expenses should be on the Sch E and part on the Sch A ... the program is doing it correctly. 

[FangxiaL · Accepted solution]

 Even if you turned your residence into a rental property the first time in 2021, the personal use days should be 0 if you did not live in the property after July 1, 2021. Otherwise, the depreciation won't calculate properly. Also, make sure to take your depreciation, if not, you are leaving deductions off the table.

Go back to make the correction by following these steps:

1. Click on Edit/Add next to Rental Properties and Royalties (Sch E), then Edit next to your rental property
2. On the next screen, click Edit next to Rental property info
3. On the next screen, in the middle section Rental type and usage, click Edit under Days rented
4. On the screen that says Was xxx rented every single day in 2021? select No and enter 184 as Fair rented days and 0 as Personal use days.

You can deduct the full expenses that are related to rental only, but you need to manually separate the property tax paid and mortgage interest by using this formula (184/365)*property tax paid to allocate to the rental portion and do the same for mortgage interest. And of course do the same calculation for whatever else that you paid for your house that included the first half of the year when you lived there, for example, the home insurance premium you paid covered the whole year, you need to separate that payment as well.

See this help article on how to enter depreciation for your rental property.

@Jack7777

[Jack7777]

I get it now, because the rental is only part of the year so only part of the property tax is filed under expenses. Just one more question, how about the rest part of my property tax? Can I still file the difference amount ($8,740-$4,517) under deductibles & credits since I paid the full amount of property tax last year?  Thank you 

[Jack7777]

Hello fangxia, thank you so much for the detailed explanation and everything just makes sense now. I will go online to check my rental properties and Royalties (Sch E) to make sure correct dates and calculations on my mortgage interest, property tax, and insurance.

Something I want to ask if I missed from your message- The property tax/mortgage interest amount that is not calculated in rental days, am I able to file it under deduction & credits since I still paid the full amount last year? For example, my property tax is $8,740 and after using the formula I get rental portion of property tax is $4,517. Am I able to file the difference ($4,223) under deduction & credits? Thank you. 

[ColeenD3]

Yes, you can prorate your mortgage interest and property taxes between Schedule A for the personal portion and Schedule E for the business portion.

Your formula to calculate should take into account the number of days it was a rental and the number of days it was a personal home.

[Jack7777]

Got it. thank you for the clarifications!

[Jack7777]

Thank you all for the clarifications and help.