Mixed-use vacation residential rental property

[carlRcraw]

I have a mixed-use residence that I rented for 153 days and used for personal use for 103 days. I have more expenses than rental income for the year. On schedule E, Turbotax only subtacted taxes (line 16) and Other (line 19) of all of the expenses from the income. Other expenses were suspended as careover. The result is -$4,514 (loss) on line21 and line 22. This loss is also reported on Schedule 1 (line 5). I thought that since it is a mixed-use property that there should be no loss allowed. Am I wrong?

[AmyC]

You are right. You understand it was your personal residence for a good bit of the year and can only deduct expenses up to the amount of rental income. Mortgage interest and taxes are the first to make deductible expenses. If this was not a rental, they would be fully deductible on Sch A as a second home.

The total expenses exceeding the income are not deductible and should not be on Sch 1, line 5. Let's double check a few things:

Property profile - you may have a speck of data stuck somewhere in a field:

• Property rented all year? select No
• Delete and re-enter the 153 rental and 103 personal use days

Expenses section:

Go through the expenses section again until you reach Allocating Interest and Taxes. Select Use the IRS method. This should restrict your loss.

Look at your forms:

• Sch E Wks and verify the amount reported in col 1 is broken up for sch E reporting and allocated to personal use.
• Look at Sch 1 again

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[carlRcraw]

Thanks for your reply. Things appear to be entered correctly. Other expenses are being split correctly between the renter's portion and personal use portion. Line 16 (taxes, $2,225) and Line (19a-d, total of $22,412) are the only lines that have expense in column (b, Reported on Schedul E), all other expenses are being pushed to column (d, home loss limitation (carryforward)). I suspect that cerain expenses are being allowed to be a loss by TT in my mixed use senario; I just don't know why it's being allowed and would like a reference to the IRS rules. Carl

[AnnetteB6]

Please define what you mean by 'mixed use' property.  If you converted the property from personal use only to rental use only OR from rental use only to personal use only during the year, then you need to change the number of days of personal use that you have entered.  

Personal use days are only considered when your property is a rental property, but you use it personally during the time it is also being advertised and available to rent.  This situation is the most common with a vacation rental property that is used for a certain number of days by the owner in between renters.

If you converted it during the year, then your personal use days should be zero and the rental days the number of days it was rented.  Then, you would prorate the expenses yourself and only claim the expenses that were incurred during the time it was a rental property.  Personal expenses such as mortgage interest and property tax would also be prorated and you would claim the personal portion on Schedule A, with the rental portion claimed on Schedule E.

@carlRcraw 

[carlRcraw]

Hi, Thanks for your response. My property is a vacation residence that is used by me for 3+ months yearly and I rent it for 3+ months yearly during the winter months in Florida. Carl

[AmyC]

About Publication 527, Residential Rental Property (Including Rental of Vacation Homes)

 page 28 states and the worksheet  5-1 begins on page 29:

Used as a home and rented 15 days or more. If you use a dwelling unit as a home and rent it 15 days or more during the year, include all your rental income in your income. Because you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use, as described earlier in this chapter under Dividing Expenses. The expenses for personal use aren’t deductible as rental expenses. If you had a net profit from renting the dwelling unit for the year (that is, if your rental income is more than the total of your rental expenses, including depreciation), deduct all of your rental expenses. You don’t need to use Worksheet 5-1. However, if you had a net loss from renting the dwelling unit for the year, your deduction for certain rental expenses is limited. To figure your deductible rental expenses and any carryover to next year, use Worksheet 5-1.