My wife and I sold our home in September, 2019. It was rented out 6 months of 2019 and full time since 2016. Our house was about 1,200 square feet and it had an attached apartment of 600 square feet. In the past, we just estimated our rental use percentage at 33% based on those numbers. This is what a tax professional advised the year we purchased and we have done the same every year since when calculating deductions/depreciation on the income from the rental.
Now that we sold the property, we have to pay capital gains tax on the business portion of our home. Using the rental use proportion of 33% doesn't seem fair as there was a 460 square foot detached garage, a 1200 square foot basement and a large yard/porch they did not have access to. What are considered fair ways to calculate the business use percentage for capital gains? If I go by total square footage of all buildings including the basement (but not the porch), the portion of business use is 17%
Should my rental use calculation for deductions/depreciation match my business use calculation for capital gains in the same year? (33% when calculating rental use and 17% for capital gains)? If they should match, is it okay to change my rental use to 17% even though every year prior I used 33%?
