Do I have to claim my expenses on rental property or can I skip them for bigger tax return?

What you're seeing is actually a result of how rental property income is handled in the tax code. Those expenses don't just reduce your rental income - they can potentially create a "paper loss" that has special rules. When you have rental losses, they may be subject to passive activity loss limitations depending on your income level. Since your household income is around $130k, you're likely seeing the phase-out of being able to deduct those losses against your other income. The tax software is probably applying these limitations correctly. To answer your questions directly: 1. Yes, it makes sense your refund is decreasing when adding expenses because of these passive loss limitations. 2. You absolutely must report all legitimate expenses. Choosing not to report expenses would be misrepresenting your situation, which isn't allowed under tax law. Think of it this way - those expenses aren't "gone." They're being tracked and can potentially be carried forward to future years when you sell the property or have more rental income. Not claiming them now could hurt you later.

I went through this exact same situation last year with my rental duplex! I was so confused when adding expenses LOWERED my refund. After hours of research and almost giving up, I found taxr.ai (https://taxr.ai) which analyzed my tax situation and explained everything. Turns out there's these things called "passive activity loss limitations" that kick in when your income is over $100k. The software showed me exactly how my rental was being classified and why my deductions weren't working the way I expected. It also helped me identify some expenses I hadn't categorized correctly that were hurting my return. The cool thing is it explained how those "unused" losses get carried forward to future tax years or when I eventually sell the property. Totally changed my understanding of how rental properties work tax-wise.

Just wanted to update after trying taxr.ai for my rental property situation. WOW - what a game changer! I uploaded all my messy receipts and bank statements, and it organized everything perfectly. The biggest help was seeing exactly how it categorized my expenses between repairs (fully deductible now) versus improvements (which have to be depreciated). It also found several deductions I had completely missed - including travel expenses to check on my property and some home office deductions related to managing my rental. Really appreciate the recommendation. For anyone dealing with rental property tax questions, this tool actually makes things understandable instead of more confusing!

If you're hitting passive activity loss limitations and can't seem to get answers from TurboTax, you might want to try getting through to the IRS directly. When I had a similar issue with my rentals, I needed specific guidance but couldn't get through their phone system - kept getting disconnected after hours on hold. I ended up using Claimyr (https://claimyr.com) which got me connected to an actual IRS agent in about 15 minutes instead of waiting for hours. You can see how it works at https://youtu.be/_kiP6q8DX5c if you're curious. The agent walked me through exactly how passive losses work and explained my options for carrying forward losses versus using them in the current year. Getting actual clarification from the IRS directly made me feel way more confident about my filing, especially since rental property tax rules are so complicated.

Ok I have to eat my words about Claimyr. After my skeptical comment I decided to try it just to prove it wouldn't work... and I'm shocked. Not only did I get through to the IRS, but I got connected with someone in the specific department that handles passive rental losses. The agent explained exactly why my rental expenses were being limited on my return and confirmed that yes, you MUST report all legitimate expenses even if it seems to lower your refund. She walked me through how these losses get "suspended" and can be used in future years. Definitely the most helpful tax conversation I've ever had. For anyone dealing with rental property tax questions, getting direct answers from the IRS was way more valuable than trying to guess or follow generic advice online.

You're legally required to report your expenses. If you don't and get audited, you could face penalties for misrepresenting your income. The IRS expects rental properties to have expenses. What's happening is that your rental is probably showing a loss after expenses. Since your income is relatively high, these losses are being limited by passive activity loss rules. However, these losses don't disappear - they carry forward to future years or until you dispose of the property. Definitely talk to a CPA who specializes in real estate. This is a complex area and online tax software doesn't always explain things clearly.

Another rental owner here! This is completely normal and happens to all of us with higher incomes. You NEED to report those expenses even though it seems counterintuitive. Here's why: 1) Those expenses adjust your basis in the property, which affects capital gains when you sell 2) Unused losses carry forward indefinitely 3) When you eventually sell, you can use ALL accumulated losses against ANY income type Also, don't forget to properly classify repairs vs improvements. Repairs can be deducted fully in the current year, while improvements need to be depreciated. That new flooring and sod might be improvements, not repairs.