Claiming Airbnb Expenses is Confusing and Inconsistent

[RichMM]

I am trying to enter Airbnb income and expenses.  When I answer the questions, TT double bookkeeps, resulting in loan interest and property tax claims that far exceed what we actually paid this year. 

I entered the 1098 that I received from the mortgage company, for our home, which includes a new Airbnb apartment.  The 1098 provided TT with our interest and property tax for the year.  Then under the property rental section, I told TT the property is part of our primary residence and answered the questions about the interest and taxes, etc., for the Airbnb apartment.  That resulted in total interest and property tax claims that were way too high. To correct this (I hope I'm doing it right) I tried several things that didn't work, but eventually I changed my 1098 to show zero ($0) interest and the amount of property tax that is NOT associated with the Airbnb. 

However, I couldn't find instructions for this anywhere. 

When I called for help I was told that TT removed "Live Assistance" from TT Premier, starting this year, but I could switch to TT Live, pay another $129 and start over, but this time with access to someone who could answer my questions.  (REALLY??)

Airbnbs are common today. 

Did I do it correctly?

Why is it so hard to understand how to enter the data.

Why can't the rental property section coordinate with the home mortgage 1098 section?

Why does it calculate the rental/personal use split differently for interest and property tax - without good instructions for either?

Are we really supposed to change the 1098 from what the mortgage company provided?

[RobertB4444]

When you have rental property TurboTax requires you to enter the 1098 through the rental expenses section and then carries the remainder (if any) over to schedule A.  When you also entered it into the deductions section the system assumed that you had another 1098 and doubled your deduction.  So going back and deleting that was the right thing to do.

You shouldn't have to change the 1098.  As long as all of your percentages are entered correctly into the system then it should take your deduction and put the rest of the interest on schedule A.  It should communicate that fine.

Here are some good instructions for Air BnB owners using TurboTax.

@RichMM 

[RichMM]

Thank you, Robert.

I have an additional question.  I am including our new Airbnb's income/costs in our taxes.  I don't think TT is handling the costs correctly.  I think it is lacking in two dimensions.

1.  The first issue is that some costs are purely attributable to the Airbnb, while some are related to both the Airbnb rental and our use of the space when it is not rented.  TT handles this correctly for some costs, like advertising, which it attributes 100% to the Airbnb.  However, there are other pure Airbnb costs that it prorates based on the number of days the space is rented and the number of days we used the space for personal use.  An example is cleaning costs.  We only pay to have the space cleaned if we are out of town when one guest leaves and before another arrives.  If we are in town, we clean it ourselves and don't record any cost.  So, while this cost is purely related to the rental, TT is prorating it, so that our tax forms only claim a portion as a rental cost.  Why doesn't TT ask us if costs are purely rental versus shared rental/personal?

2.  TT doesn't appear to prompt or ask about the size of the rental space as a fraction of the total space in our home.  I think I am supposed to report some costs (e.g., utilities) prorated based on % OF AREA and based on the fraction of TIME split between rental/personal.  TT does the TIME split.  However, as TT leads us through the questions related to costs it doesn't tell/ask us about the area %, nor does it tell us which questions to answer with the full costs and which to answer with a fraction that is based on the area %.  Clearly, there are some of each.  The instructions you sent says I am to put my 1098 into the rental section and it will divide the costs between the rental costs and other deductions, so clearly those are to be the full costs - otherwise we wouldn't get the full deductions.

Please help me understand if I am missing something about how I am to use TT.

Thanks!

[DianeW777]

Preparing the numbers for your Airbnb rental can be easier if you prepare them for the Airbnb only.  See the answer to your questions below.

Question 1: When you have expenses that are for both the rental and the personal use of the space then it can get quite complicated for any tax software.  The best advice in your situation is for you to break out the expenses for the Airbnb and then enter them as 100% rental including the 1098 mortgage interest. 

Question 2:  Yes you would use costs that are associated with the entire property when using a space for Airbnb.  

1. To use the cost of the home as an asset for depreciation you would do exactly as you indicate.  Determine the square feet of the area divided by the total area of the home and then divided by the time of Airbnb use versus personal use.
   • Start with the purchase price, purchase expenses, capital improvements to the entire home and to the Airbnb space, then apply the formula for the depreciable basis for the home.  Based on usage this figure could vary each year.
2. This same formula would be used for utilities, internet or other expenses that are for the entire home.

As a suggestion you could start using an excel or similar platform to enter your data regularly with formulas already set up.  At tax time, you could just use the sheet to enter your tax return data.

@RichMM 

[RichMM]

Thank you, Diane.

I entered my Rental Property expenses as you recommended (I told TT I know the costs and entered prorated costs based on my spreadsheet).  That seems to be working now.

HOWEVER, per TT instructions in the Premier desktop program, I entered the balance of my mortgage info (inc. Interest) TT Form 1098 entry page.  These costs show up in my list of deductions and credits, but they do NOT make it to Schedule A. (The prorated real estate taxed, entered the same way, do make it to Sch A)  Therefore, it is Incorrectly giving me the Standard Deduction.

HOW can I get TT to include the costs in my 1098 in my deductions?  (Currently, it is only counting my charity donations and some taxes.)

[DianeW777]

Go to your personal deductions and enter the property tax and mortgage interest there but only the personal portion. I assume you used only the rental portion for your rental income.

This will add those expenses/deductions to the Schedule A itemized deductions.

• Select Deductions & Credits > Scroll to Mortgage Interest > make your entry

@RichMM 

[RichMM]

Thanks, Diane, but I think that is what I did.  

On the page that summarizes 11 categories of Deductions and Credits, the first is "Your Home."  There it shows $9,436 of interest and $1665 of property tax (the balance of each (prorated) are shown under Rental Property.).  

However, when I look up my schedule A, the taxes show up, but for Mortgage Interest, schedule A shows $0.

[DianeW777]

You should try deleting the mortgage interest under Deductions and Credits and then follow the instructions next before you add it back to the return.

Clear your cache and cookies. It handles many issues that seem nonsensical on a regular basis. 

• Close your TurboTax return first.

Watch to be sure you are selecting 'all time' as example.  Do not use selections like 'last hour' for those browsers that give  you options.

• How to clear your cache

Next Step:

If you would like you can send us a “diagnostic” file that has your “numbers” but not your personal information.  If you would like to do this, here are the instructions: 

TurboTax Online:

Go to the black panel on the left side of your program and select Tax Tools. 

1. Then select Tools below Tax Tools. 
2. A window will pop up which says Tools Center.  
3. On this screen, select Share my file with Agent. 
4. You will see a message explaining what the diagnostic copy is.  Click okay through this screen and then you will get a Token number. 
5. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.  

TurboTax CD/Download:

If you like, you can send a copy of your return that will be scrubbed to eliminate your personal data by using these steps:

1. Click on Online in the top left menu of TurboTax CD/Download for Windows
2. Select 'Send Tax File to Agent'
3. Write down or send an image of your token number then place in this issue.
4. We can then review your exact scenario for a solution.
5. Please also tell us any states included in the return. 

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution. 

@RichMM 

[RichMM]

Thanks for your prompt replies, Diane!

I tried what you described.  I deleted the mortgage interest, closed TT, erased my cache, reentered my interest, ... and got the same result.  I am still getting the Standard Deduction because TT is not putting my mortgage interest into my Schedule A.

So, I tried to send you a file (minus personal info).  However, under the top left menu ("TurboTax") there is no "Online" option on the menu.  I can't find an "Online" option on any menu.  FYI - I am on a Macbook Pro.  Does that make a difference?

[MichaelG81]

This is a confirmed issue that is actively being resolved. Thank you for your patience. Please click here to sign up for updates when resolved.

@RichMM 

[RichMM]

Diane,

I found "Send Tax File to Agent" under "HELP" on my Mac version of TT.

The number of the file I sent is:  1086633

In addition to Federal, there is a Colorado State Return included.

[MoniqueLO_]

Our IT team is working to resolve this issue. Please see this Help Article to sign up for updates so you will be notified when this issue is resolved. 

@RichMM