Pennsylvania for-profit rental property
TurboTax for Pennsylvania state tax seems to confuse for-profit and business rentals.
According to PA-40 instructions, a rental can be for-profit but not be considered a
business for PA tax purposes:
"If you rent or lease your property to realize a profit, but do not operate the rental
property as a business activity, you may offset losses against other rental or royalty
income."
But if a rental is not for profit (and not a business), PA-40 instructions say that:
"You may only deduct your rental expenses up to your rental income, and you may
not use a loss to reduce other rental income."
PA-40 instructions say that Pennsylvania follows IRC Section 280A to determine if
a rental is for-profit (for example, rental of a unit that is also used by the taxpayer
or below fair market price is not considered for-profit).
On the contrary, Turbotax guidance for "Is this a for-profit property? When to check this box"
says:
"Your rental is considered a for-profit (business activity) rental when ..." followed
by a characterization of *rental business* (not for-profit rental) according to
PA-40 instructions.
Following this guidance, people who do not have what Pennsylvania considers a rental
business but do rent with the intent of making a profit will unnecessarily declare their
rentals as not for profit, missing opportunities for losses to offset profits in other rentals and
in such cases having to pay higher taxes.
Moreover, there does not appear to be any obvious way to properly declare a rental
business in Turbotax Pennsylvania. If you click the "for profit" button, the rental unit
ends up in PA Schedule E and PA-40 line 6, not PA Schedule C and PA-40 line 4, as
should be the case in rental businesses.
So, it looks to me that there are two bugs in Turbotax Pennsylvania: (1) incorrect guidance
for non-business but for-profit rentals; and (2) no (obvious) way to declare a rental business.
Can more experienced users confirm?
