1098 Mortgage Interest and Rental Unit

[Once a year Accountant]

I have a duplex where I live in one unit and rent the other.    I just enter the total amount of everything and let Turbo Tax do the 50% Math.    However,  I have a questions.  When I enter my mortgage interest and taxes in the Rental Income section I see the amount that it says will be deducted for my personal portion. 

However my question is this ... later on in Turbo Tax when I get to the deductions portion it ask me to enter the values from Box 1 of my 1098 ---- do I only enter 1/2 the value here -- even though that entering 1/2 the value will not agree with Box 1 of my 1098.

Any clarification would be appreciated.  Thank you.

I remember in past Turbo Tax versions it gave better guidance on this.  

[PattiF]

For a Multi-Unit property such as the duplex that you are reporting, it is recommended that you let TurboTax do the math for some entries. 

• Enter the entire amount of the mortgage interest and real estate taxes for the rental. TurboTax will prorate mortgage interest and property taxes and carry the other amount to Schedule A for your personal use as part of the property. 
• TurboTax can prorate some other expenses such as repairs and utilities that affect the whole building. 

[Once a year Accountant]

So does that mean when I do my personal section when it ask "did you receive a Form 1098" do I just say "No" .  Only asking because it the rental section it is silent on anything about form 1098 ?  

[KrisD15]

Yes,  

say No.

The program does ask on the Personal section to "remind" people, but in your case answer "No" and enter it on the Rental screens where the program will list the rental portion as an expense on Schedule E and post the remaining amount to be used on Schedule A if you itemize. 

[Once a year Accountant]

Kris

I have a follow-up Question:

FYI:  My mortgage Interest is ~ $7000

I am hoping someone can answer this question.  My taxes are relatively simple, I own a 2-family home and I live in one of the units and rent out the other unit.  I have been using TurboTax or years and I have always entered my Mortgage Interest in the Income section “Rental Properties and Royalties Section”  of Turbo Tax. 

I usually just use 50% of all expenses so Turbo -Tax automatically assigns what goes towards the “Personal” side of things.  When I enter my total Mortgage Interest here (Rental Properties an Royalties section) you are NOT SUPPOSED to enter any 1098 information in the Personal deduction section of Turbo Tax. 

So just for hell of it this year I did an experiment and did my taxes two ways 1) like I always have (discussed above) and 2) I did not ENTER any mortgage interest in the Rental and Royalties section and entered it all in the Personal Deduction section.

Doing my Taxes by entering my mortgage Interest in the Rental and Royalties section (using the 50% split) my expected Return is $950

When I enter all my mortgage interest in the Personal Deduction Section my expected return is $1500.

In both instances when I look at the completed Return PDF of my Return the Itemized Deductions worksheet has $7000 for Mortgage Interest.

Why is there such a big difference in my expected refund ?

 Is it because when you enter it in the Rental and Royalties section it only deducts the $3500 of my personal deduction for this year and the $3500 for the Rental is at a Depreciation Level ? 

I hate to think that I have been over paying uncle Sam all these years.  ☹

[AmyC]

You need to look at your sch A and sch E. By law, only the personal portion goes on Sch A, $3500 for mortgage interest. Claiming $7,000, the entire amount would be wrong and would give you an increased refund which you would later pay taxes and penalties on when paying it back. 

The sch E contains all income and expenses related to the rental, it should have $3500 for rental mortgage. If either of these forms have indicated wrong numbers in the past, you will need to file an amended return to claim the adjustments.

Always check your tax return before filing in the future.

Reference:

• About Schedule A (Form 1040), Itemized Deductions - Internal Revenue Service
• About Schedule E (Form 1040), Supplemental Income and Loss  
• Should I file an amended return?

[Once a year Accountant]

thank you !!!1