As it stands now, you own to physically separate properties. One is your personal residence. The other is a rental reported on SCH E as a part of your personal 1040 tax return. Each property has a physically separate mortgate and receives a physically separate property tax bill each year. Each property also has it's own physically separate insurance policy with one policy being a "residential policy" and the other being a "rental dwelling policy". Each property also has all utilities (gas, water, electric, cable, etc) metered and billed separately. Finally, each property has it's one physically separate postal address.
So are you talking about knocking out a wall that currently separates the two units? If so, you're not to the point of concerning yourself with tax implications yet.
- Since what you "own" in a condo is considered to be from the back of the sheetrock on the walls and ceiling, and from the bottom of the flooring (be it carpet, tile, vinyl or whatever) towards the inside of the space, you can't just do what you want with this. *you* don't own the wall structure between the two units and taking out a wall may impact the structural integrity of the building affecting other condo owners in the unit on both sides, behind you, and above/below you if a multi-story structure. So first you need permission from the condo board (or owner if there's no board) as well as a permit from whatever entity issues building permits. So until you have permissions from the owner of the structure (which is not you, rest assured) and know "for a fact" you will actually get a building permit, there's really no need in pursuing the tax issues.
Keep in mind that getting the permit requires coordination with the postal services, utilities, mortgage lender(s), and a slew of other agencies that I can't think of now.
In other words, the taxes are the easy part. Getting to that point is not.
