Not for Profit Rental

Forum|Forum|3 years ago
March 2, 2023
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I rent a condo I own to my granddaughter at 35-50% of fair market value (depending on what she can afford). I have expended money for new Carpet, a bathroom remodel and new range. Where in turbotax do I enter the rent I received and where do I enter the costs of the improvements? I am using TurboTax Business edition for 2022. Thank you in advance for your answer.

MinhT1

If you rent your property below fair market value, the IRS considers that you do not rent your property to make a profit. In this case, you can deduct your rental expenses only up to the amount of your rental income. You cannot deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year.

Mortgage interest and property taxes paid can be claimed in Schedule A as for your residence.

Please refer to this IRS document, especially the section on Not Rented for Profit on page 16 of this IRS publication on how to report income and expenses.

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Ridgerunner72Author

Thank you. I've read the IRS publications, but where do I enter the dedutions? and do I only enter a dedution amount equal to the income received?

DaveF1006

You would enter these in the rental section portion of your return. Here are the complete steps to enter your information.

In TurboTax, go to federal>wages and income>see all income>Rentals, Royalties, and Farm>Rental Properties and Royalties (Sch E)>start or revisit
Answer Yes to the question Did you have any rental or royalty income and expenses in 2019 for property you own?
Follow the on-screen instructions as you proceed through the rental and royalties section.
- We'll ask you to enter general information about your rental (like description, address, and ownership percentage)
- You will eventually reach a screen that says Do Any of These Situations Apply to This Property? here is where you indicate you sold the property. Then you will enter information about how long it was rented. There is a section in this interview where it asks if you rented this at a fair market price.
- Eventually, you'll come to the Rental Summary screen, which is where you enter your rental income and expenses, assets and depreciation, and vehicle expenses.

Now let's talk about expenses. For an improvement that costs less than $2500, you may make a De Minimus safe harbor election to expense these rather than declaring these as assets. I am thinking the range may qualify for this and possibly the carpet. If the cost for each of these is more than $2500, you must declare these as assets and placed on their own asset/depreciation schedules. For this, you will go to the asset and depreciation section in the rental summary screen.

One last note, for the assets that are depreciated, the depreciation schedules are as follows:

The range will be depreciated over 5 years, if not expensed.
The carpet will be depreciated either 5 years or 27.5 years. Five years if it is tacked down and removable. If glued, it is considered attached to your rental and depreciated over 27.5 years.
The bathroom remodel is depreciated over 27.5 years.
Be sure to list your condo as a depreciable asset also.

When all said and done, you should have four assets listed as separate items to be depreciated on the depreciation schedule.

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