Airbnb for Main Home

[iowadavid]

I do taxes for my daughter and she rents her main home out about half the year.  I have a couple of questions regarding deductions. If she rented it out 62% of the year, in the business expense section I need to reduce the whole home expenses like utilities, insurance, property taxes and Mortgage interest to 62% of what was paid. The information for the property taxes and mortgage interest is entered in the non-business section from a 1098.  Do I reduce these to 38% of what was in the original 1098, check the box saying I entered a different number, or will TurboTax take care of that?
Also can I depreciate the house for the 62% of the time it was rented and where do I enter the house as an asset that needs to be depreciated?

[RobertB4444]

First, the most important question is what percentage of time was the house 'available for rent'.  That's the key question - not the percentage of time that it was actually rented.  If she rented it our 62% of the time because she didn't  have it advertised or available to be rented then 62% is correct.  But if it was available one hundred percent of the year but only had people renting it 62% of the time then the correct application is 100%.

This available to rent percentage is what you will use to figure out the percentage of the home to be depreciated as well as the deductible percentage of costs for the home.  

Once you have input the business use percentage the system will calculate the percentage of deductions available.  You can enter the full amounts and they will get properly calculated.

@iowadavid 

[iowadavid]

Thank you very much. I have one last TurboTax specific question. I know you put the property taxes paid for the Airbnb property in the business section of TurboTax. Then TT will take the percent used for a rental in the business section and automatically put the rest in state taxes paid on schedule A.

How does mortgage interest work. Let's say the 1098 I entered in Schedule A has $10,000 in Mortgage interest. And the house was used 62% of the time as a rental. Do I change what I put in the 1098 to $3,800 and put $6,200 in the business section? Do I need to explain why the numbers I put in the 1098 are different than what the 1098 said?

[DawnC]

Mortgage interest works the same way.   Once the business use percentage is figured, TurboTax will calculate the percentage of deductions available.  You can enter the full amounts and they will get properly calculated.   You are not going to change the number if you are letting TurboTax calculate the deductions.    However, you have the option to calculate the amounts yourself and enter the adjusted amounts on the different schedules (business vs personal).   In that case, you would change the amounts, but no, you don't need to explain anything.   Everything from your 1098 will be included somewhere on the return.   

[iowadavid]

Dawn thanks 

I did see where TurboTax does figure out the amount of property taxes and does calculate those correctly in both the business and Schedule A.

I am having an issue with the Mortgage Interest.  I think the issue is because of only being able to deduct interest on up to $750K of the remaining loan value of the house.  Before I made the main house a rental the deductible mortgage was reduced by 20% to get the loan to $750K. That was $26K of mortgage interest deduction on Schedule A.  Once I made the house a rental, and it was rented 62% of the time, the deductible mortgage interest deduction on Schedule A increased by $7K. That was what was 38% of what I entered in the business section. Should I not enter the interest in the main section, as it is also being entered in the business section?

[RobertB4444]

Right.  If you enter it in the business section it will carry it over to schedule A for you.  If you enter it in schedule A as well you'll be entering it twice.

@iowadavid