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Old 02-06-06, 01:24 AM   #1
sestivers
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I'm own a house that I am renting out. On TurboTax, there is a tab in the INCOME section for income from rentals. On that tab, along with other pertinent info, I entered the amount of interest and property tax I paid for the year (there are specific fields in which to do this). I'm wondering I am also supposed to claim the interest and property tax in the DEDUCTIONS tab (like you would if you were living in a house that you own). I think the answer is no - it seems like I'm claiming the same deduction twice (and, in fact, my refund about doubles from ~$800 to ~$1500). Does anyone know the real answer?

Another thing I'd like help with, is if I am married filing jointly, and my state I pay tax to is different from my wife's (MI v. WA), how can I get TurboTax to recognize this. All of her income is in WA, which is tax-free. All of my income is for MI, which is tax-free for military income. But MI wants taxes to be paid on the money my wife made in WA. I can't figure out how to manually change this. Do I have the option of not filing in MI if I know I don't owe them any money? If I got audited, they'd figure that out, and I still would not be penalized, right?
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Old 02-07-06, 12:54 AM   #2
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My grandma is an private account im sure she would know..........
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Old 02-07-06, 02:57 PM   #3
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Originally Posted by sestivers
I'm own a house that I am renting out. On TurboTax, there is a tab in the INCOME section for income from rentals. On that tab, along with other pertinent info, I entered the amount of interest and property tax I paid for the year (there are specific fields in which to do this). I'm wondering I am also supposed to claim the interest and property tax in the DEDUCTIONS tab (like you would if you were living in a house that you own). I think the answer is no - it seems like I'm claiming the same deduction twice (and, in fact, my refund about doubles from ~$800 to ~$1500). Does anyone know the real answer?

Another thing I'd like help with, is if I am married filing jointly, and my state I pay tax to is different from my wife's (MI v. WA), how can I get TurboTax to recognize this. All of her income is in WA, which is tax-free. All of my income is for MI, which is tax-free for military income. But MI wants taxes to be paid on the money my wife made in WA. I can't figure out how to manually change this. Do I have the option of not filing in MI if I know I don't owe them any money? If I got audited, they'd figure that out, and I still would not be penalized, right?
Regarding the first section, yes, you are correct. The interest and property tax for your rental goes into the income tab. When you review your final forms, make sure that the interest and taxes you're referring to show up on your Schedule E and not your Schedule A. Also adding it into the deductions tab would be double counting it.

Regarding the second part, does your wife's state W-2 get sent to WA or MI? Generally, you have to file state taxes in each state that receives a W-2. I'm not sure if you can get away penalty-free if you don't file - some states have penalties for not filing, regardless of whether tax was due or not. As you know, Turbotax just pulls the information from the Federal forms to fill out the state forms, but that may not work for you. Personally, in your case, I'd use Turbotax for my federal filings, but I'd do my state filings manually.
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Old 02-08-06, 01:16 AM   #4
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Quote:
Originally Posted by sestivers
Another thing I'd like help with, is if I am married filing jointly, and my state I pay tax to is different from my wife's (MI v. WA), how can I get TurboTax to recognize this. All of her income is in WA, which is tax-free. All of my income is for MI, which is tax-free for military income. But MI wants taxes to be paid on the money my wife made in WA. I can't figure out how to manually change this. Do I have the option of not filing in MI if I know I don't owe them any money? If I got audited, they'd figure that out, and I still would not be penalized, right?
Go to the VITA office on base. Ask them.

Were you stationed in WA when your wife earned the money? Was she ever in MI? Once you move on military orders, your wife becomes a resident of your duty station. There is no exemption like there is for us in the military; it's only the member that gets that protection. So, for example, I'm in RI. I'm a NH resident (no income tax). My wife is from WA. If she were to take a job here in RI, she'd have to pay RI income tax. And up until last year, RI would grab some of my income by taxing hers at a rate figured using BOTH our incomes. The federal government put a stop to that last year and now the law specifically forbids states from doing that; they must subtract the military member's compensation from the AGI (if you use your federal AGI) in figuring the tax.
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Old 02-08-06, 06:59 AM   #5
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I figured it out... TurboTax was trying to tax me on the income from renting out my house, NOT the money my wife made. So when I entered it as out-of-state income the tax owed to MI came out to zero (as I thought it should be).

I also realized that depreciation is SWEET! I did not have it entered at first, and it basically doubled my return! Renting at a loss is not such a bad deal after all.
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Old 02-08-06, 03:27 PM   #6
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Don't forget to deduct other expenses on the house. Say, if you have to fix it up to rent it out, tools & materials are a business expense you can deduct. Damn right. If you pay for any utilities for your tenants, write it off. If you don't live there anymore, you can deduct mileage to & from the property, all sorts of stuff like that.
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Old 02-08-06, 04:19 PM   #7
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Don't forget to deduct other expenses on the house. Say, if you have to fix it up to rent it out, tools & materials are a business expense you can deduct. Damn right. If you pay for any utilities for your tenants, write it off. If you don't live there anymore, you can deduct mileage to & from the property, all sorts of stuff like that.
and if you set up a space in your house (gotta be dedicated) to running your rental business, you can deduct that space (as a percentage of your own house). Mileage and partial meals when you go visit your property. Landscaping (deductible for rentals, not for your own house), repairs, etc.

I rent my property at a loss, too, but it's not too bad if you do it right. I ran into the same double-interest thing last year. I pulled out alot of hair trying to figure it out. But then, I do taxes the old fashioned way--with a pencil and a calculator. Call me old fashioned, yeah.
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Old 02-08-06, 04:28 PM   #8
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Originally Posted by velogirl
and if you set up a space in your house (gotta be dedicated) to running your rental business, you can deduct that space (as a percentage of your own house).
but be aware that when you will sell your house, equity gain on this portion of the property may be taxed.
This often comes as an unpleasant surprise to people who claim home office space deduction. Gotta be worth your while to do it.
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Old 02-08-06, 04:41 PM   #9
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but be aware that when you will sell your house, equity gain on this portion of the property may be taxed.
This often comes as an unpleasant surprise to people who claim home office space deduction. Gotta be worth your while to do it.

A point worth making, definitely keep in mind capital gains implications. If you sell a house you haven't lived in in any 24 months of the last 5 years, its going to hurt. That assuming that capital gains rules don't change again. Because my house was a duplex, I only owed gains on 1/2, but had I waited another year to sell, it would've hurt a lot more.
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Old 02-09-06, 03:26 AM   #10
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Thanks everyone... TurboTax made it so easy to deduct the things everyone mentioned. By combining the booklet that the IRS sends (with the rules and such) with T/T I am confident that an audit would come out just fine, and I don't think a professional would have netted me any more than about $50 extra. It's also nice to be able to use T/T for free being a military member.

I will move back into my house next year so hopefully I will miss any of the penalties that were mentioned.
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