Rental property maintenance expenses raise federal tax owed

[bernsm]

Using TurboTax to do my 2020 taxes. In the rental property section I noticed that when I added maintenance expenses the Federal Taxes owed increased. It seems to me that Federal tax liability should decrease when you make less money on the rental property.

[HelenC12 · Accepted solution]

It's probably because of the Qualified Business Income (QBI) deduction. You probably have carry-forward passive losses on your rentals. If you don't list rental expenses, the profit on your rentals increases, but you don't owe tax on these profits because of the carry-forward. Then you would get a QBI deduction of 20% of those profits. As you add expenses, the profit decreases, and the QBI deduction goes down, thus raising your taxes.

Related Information:

• What is the Qualified Business Income (QBI) deduction?

Source: mkkolb

[bernsm]

That's a great answer - thank you! That being the case, why wouldn't I not claim the expenses, thus reducing my tax liability?