Property taxes for a room rented on Airbnb for several months

[heggly]

How does TurboTax prorate property taxes for a room rental? I am struggling to under the tool logic here. Scenario: I have rented a room (1Bd out of 3) on Airbnb starting in September 2019 (rented for 54 nights). Let’s assume my total property tax for 2019 is 10k per 1098. What should I input in the tool? I was never asked about the number of rooms rented vs total by TurboTax. I assume it’s not prorating. When I follow the instructions and input line 1 from 1098, which is $10k, the result doesn’t make sense (like $7k loss).  Please help. The same question applies to the mortgage interest. 

[KathrynG3]

It depends. TurboTax will split the mortgage interest expense for you, but you will need to calculate the property taxes. During the rental property interview, carefully go through each screen, which will provide more guidance in the learn more links.

There are multiple ways to calculate the rental portion of your property tax, so I am going to defer to the IRS to the extent of specifics they do provide.

2019 Publication 527 Residential Rental page 21 has Worksheet 5-1 to calculate the divided expense based on the days available for rent. 

Further guidance from the publication, from the middle column of page 16: You can use any reasonable method for dividing the expense. It may be reasonable to divide the cost of some items (for example, water) based on the number of people using them. The two most common methods for dividing an expense are (1) the number of rooms in your home, and (2) the square footage of your home.

10 Tax Tips for Airbnb, HomeAway & VRBO Vacation Rentals - TurboTax Tax Tips & Videos

Video: Tax Tips When Renting Out Your Home on Airbnb, FlipKey & Others - TurboTax Tax Tips & Videos

@heggly

[heggly]

Hi Kathryn. Thank you for the prompt response. I am familiar with the IRS methods to calculate the tax and interest deduction, I am just not sure what the tool is doing with the numbers. I deleted the rental section of the tax return and did it from scratch. I chose the Option “I am renting part of my home”, but was never asked what portion of my home is being rented out. How can the tool prorate taxes and interest correctly without this information? Or is the TurboTax expectation that I input a prorate number to account for the % of rented space and the tool does the math on the days rented during the year? It is not clear in the instructions. Thank you!

[KarenJ2]

You need to enter what percentage of your home is being rented out.  Please check the screens again.

Enter your income and expenses in the Rental section of the Premier Edition.  On the first screen below, check that you rent a part of your home. If it is a straight division of expenses (say 75% personal, 25% rental) you can have Turbotax do the calculations. You do have bank records as proof of income, but you should have actual receipts for expenses.Edit

From TurboTax Colleen3

You can deduct, for that room of the house, items necessary to produce income. Mortgage interest, property taxes and PMI are normally deducted on Schedule A anyway, so these will be prorated on both Schedules A and E. Expenses that exclusive rental expenses still have to be prorated, you just can't take the personal portion on Schedule A.

When you're answer the question regarding how many days is a room in your house rented, answer the number of days rented (258) and how many days you used that room personally the rest of the year (107). You can't rent it and use it personally at the same time. If it was rented all year, put 365.

Screens to take notice of in the program:

"Do any of These Situations apply to This Property"

Select "I rent out part of my home".

When you marked the box for TurboTax to allocate per the percentage of the business portion of a mixed-use property the expenses are only entered one time in the rental section and TurboTax will allocate correctly to personal Schedule A and business to Schedule E according to the percent you entered.

Yes, to let TurboTax calculate the expenses for you.

On screen "enter use percentage" this where the % goes for TurboTax to do the calculation.

Enter rental use percentage.

TurboTax will flow personal to Schedule A and rental to Schedule E.

Only the exclusive used are is considered rental area. Common area is available to all and is not a factor in allocation of expenses.

How to divide expenses.  If an expense is for both rental use and personal use, such as mortgage interest or heat for the entire house, you must divide the expense between rental use and personal use. You can use any reasonable method for dividing the expense. It may be reasonable to divide the cost of some items (for example, water) based on the number of people using them. The two most common methods for dividing an expense are (1) the number of rooms in your home, and (2) the square footage of your home.  

See the link below for greater detail.    

IRS Publication 527 Residential Rental Property

TurboTax HelenC12 Response to Airbnb income and expenses

10 Tax Tips for Airbnb, HomeAway & VRBO Vacation Rentals.

[heggly]

I double checked and found that if you didn't rent the property all year, the screen to allocate the percentage of rental does NOT show up. This seems to be a bug. This is how to reproduce it:

Starting in the rental section:

1) Check boxes

"2019 was the first year I rented this property",

"I rent out part of my home",

"I converted this property from personal use to a rental  in 2019" -> Continue

2)  Info Screen "Converting Your Home to a Rental" -> Continue

3) Screen "Was This Property Rented for All of 2019?"

Now it depends on your choice:

a1) "No, this property was not rented all year",

enter days for fair rental price and personal use -> continue

a2) There are more options but no screen to select the percentage!

This is how the screen will show up

b1) "Yes, this property was rented all year."

"Always rented at a fair rental price" -> Continue

b2) "No, I don't have a home office" -> Continue

b3) Now, the desired screen shows up "Let Us Calculate Your Expense Deductions for You", "yes" -> enter percentage

In my case option a1) would be correct and based on your answer above there should be that option available even if I didn't rent this property all year. Please let me know how it's possible to do that

Thanks!

[heggly]

Hi,

it seems the option to select the portion of the home that's being rented out is missing as described in the steps above. 

Any updates on this?