I am trying to enter my rental income in Turbo Tax. I rent out my upper bed room for 3 months of last year. I earned $3000 as rental income in the year 2017 and calculated $200 of utility expenses. I entered into TurboTax that I rented out part of my house and it walked me through with some questions. Asked me how many days of the year did I rent out the upper bedroom. I entered 91 days and I used it for 274 I entered the utility expenses and then I entered my mortgage interest again. When I entered $8100 as my mortgage interest from my 1098 form, it gave me a huge deduction of around $2000 as expenses and my net rental income fell to $800. I have already entered my mortgage interest in my itemized deductions. Is this ok? Also in another form it asks for 'Other common expenses'. Here is listed 'Utilities', 'Advertisting' etc. Another field on this same page is 'Real Estate Taxes'. Should I enter my yearly property tax of $7000 here. I wonder if that is correct since if I enter this value then my net income will go negative?
Disclaimer: I am not a CPA and I am not giving tax advice.
Based on your post, it sounds like you are renting out a portion of your primary residence, but trying to take a full deduction on your taxes and mortgage interest. Typically, when I've seen tax returns for duplexes, only half of the taxes/interest deductions are taken. I am not sure how you would go about calculating these deductions given that you only rented out a room for a portion of the year. You also say that you "entered your mortgage interest again." This makes it sounds like you itemized deductions and claimed your mortgage interest and then are claiming it again on your Schedule E. I would recommend finding a CPA that can help put together your tax returns. Turbotax is great, but as your tax returns get more complicated, it can be a bit trickier to use.
@Josiah Kay is correct. You'll actually want to break down your mortgage interest and property taxes between rental and personal and enter a percentage on each schedule.
Don't forget for your rental property, you can also take a portion of depreciation expense. You'll want to start with form 8829 to get this right (and remove whatever you've entered for Schedule A for TurboTax). 8829 will help you allocate the amount between personal and rental.
First you need to calculate the area that you rented to the full house.
This can be done using square footage or rooms
square footage of room(200)/ total square footage of house(1000) = 20%
Then you need to prorate it further since you only rented it for 3 months(3 months / 12 months = 25%
If your property taxes were $10,000 for the year. the property taxes deductible related to the rental would be
$10,000 x 20% x 25% = 500
You would do something similar with home owners insurance and mortgage interest.
You also can't double dip - so make sure that the total real estate taxes deducted on schedule A and Schedule E isin't greater than the total amount of real estate taxes paid.
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing