Tax due goes up the more expenses I enter

[Chappie73]

I have a rental property that was rented for 7 months of 2023.  As I enter each expense (advertising, maintenance, repairs, supplies, and utilities), my tax due increases.  For science, I entered expenses into Form E manually, taking my $2,288 Income to a $7,000 loss and my tax due went up even more.  This makes no sense.

[Carl]

As just one example of why this happens:
A married couple filing separate returns does not qualify for the EIC regardless of income.

If your income is to low, you do not qualify.

Most likely, since you're in the rental section, you've not yet entered any other income such a W-2's. Therefore the program can only work with what it has "right now" at this specific point in time. Things will probably change as you continue to enter data into the program, once you are past the rental section and start entering personal income, along with other deductions and the such.

Basically that dollar amount you see while you are entering data means one thing, and one thing only; "The Program Did Something". That's pretty much it. That dollar amount means nothing else and don't matter until "after" you have completed your tax return in it's entirety and are ready to file.

[Chappie73]

I have already entered my W-2s.   What are other reasons this might happen?  The farther I go into the program, the more it seems I should not take these expenses.

[Carl]

The farther I go into the program, the more it seems I should not take these expenses.

There are more potential reasons that one can possibly cover in a single post. Understand that you are "required" to take your expenses. I can't find where it states that at this time. But I've read it either in IRS Pub 427 or some other pub related to business income/expenses.

Just be aware that number means absolutely nothing until your taxes are complete. For me with rental income from 3 rentals, self-employment income, investment income and W-2 income, that number is "literally" all over the place while I'm in the process of entering data and making selections.

[bandarupalli9]

I am seeing the same, the higher the expenses, higher the tax due I need to pay. 

The Rental income comes after the W2s, so there is no possible explanation I can give apart from being confused why the tax due is increasing. 

I ended up taking some expenses out and that reduced my tax due. Can someone explain why this is happening please? thank you

[VolvoGirl]

By increasing your deductions and expenses it will decease your income and you may not be getting as many credits as before like the EIC credit. You can't go by the refund monitor until you have entered everything in. You would have to compare the return line by line  before adding the rental income  and after to see all what changed.  

[bandarupalli9]

Thank you for your response. Is it required to deduct the expenses such as depreciation, insurance, miles driven and minor repairs etc? I compared the final tax filing with and without real estate expenses and I have the less amount due without adding these real estate expenses. Please advise.

[VolvoGirl]

Sorry you can get in trouble for not reporting all your  expenses.  

[idf_95a4d40d-3c5d-410b-92b9-2fce]

i don't think the original question has been answered. I am seeing right here in the 2024 Home & Business

[SusanY1]

There are a variety of reasons this can happen.  Most commonly, it is because income is lowered which alters the amount of certain credits available to a taxpayer.

 However, there can be other reasons. While it doesn't happen frequently, it's not a software issue but a function of how the various parts of the income interact with the tax laws.  Therefore, there will always be taxpayers who see this sort of phenomenon when working on their tax return.  If there are still additional items of income or additional deductions to enter, this amount is not an accurate reflection of the full tax picture and it's best to examine the return fully after all data is entered in order to know how the total tax due or refund received was calculated. 

@idf_95a4d40d-3c5d-410b-92b9-2fce  

[mcintyre210]

I'm having this exact same issue.  I entered Rental Income and now I'm entering all my expenses and my tax owed keeps going up and up with each expense.  Something doesn't seem right.  This hasn't happened in the past.  Nothing in my tax return has changed from previous years.

[ThomasM125]

You may have credits that decrease as your income decreases, such as the earned income credit in some instances. I suggest you look at your Schedule 3 and see what is changing as you enter expenses.

To view your form 1040 and schedule 1 to 3:

1. Choose Tax Tools from your left menu bar in TurboTax Online
2. Choose Tools
3. Choose View Tax Summary
4. See the Preview my 1040 option in the left menu bar and click on it
5. Choose the Back option in the left menu bar when you are done 

@mcintyre210 

[mcintyre210]

We are not eligible for EIC.  

[Carl]

The program does not know that until you have entered sufficient data for the program to figure that out.

[mcintyre210]

I had everything entered except the rental.