So, should I also split the purchase price in half and enter each side as 50% of the total costs, taxes, insurance and interest paid, etc?
That's what I would do. That way, if later down the road you decide to move into one of the units as your primary residence, simply removing that unit from service without affecting the other unit, is a piece of cake. Anything could happen down the road necessitating the need to convert one of the unit's to personal use. Happened to me with one of my rentals when my daughter left her ex and needed somewhere for her and my grand daughter to live. So never say never, or karma will bite you big time!
What are your suggestions about deciding to depreciate or claim expenses for each unit?
That's really not something that one can "suggest" and not a choice you get to make. You're required by law to depreciate rental property. You're also required to claim any and all expenses incurred.
When it comes to depreciation, many folks are of the mistaken belief that it's a "permanent" deduction. It's not. When you sell or otherwise dispose of the property in the future, you are required to recapture that depreciation and pay taxes on it in the year of sale/disposition. You don't have a choice.
Now if you don't depreciate the property, then in the year you sell/dispose of the property, you are required to reduce your cost basis in the property by the depreciation you "should" have taken, and then figure your gain/loss from that adjusted cost basis. So either way, you lose.
In the year you sell/dispose of the property, the recaptured depreciation increases your AGI for that tax year, and has the potential to bump you into the next higher tax bracket. So I try to keep the depreciation I'm required to take on my 3 rental properties, as low as I legally can.
Overall, you are going to find that "on paper" at tax filing time, you will show a loss each and every year the property is classified as a rental. Basically, when your rental expenses (including the depreciation you're required to take) get's your taxable rental income to zero (and it will) that's it. (Exception below). Any excess loss is just "carried over" to the next tax year, where it can be deducted "if" you have the taxable rental income to deduct it from. (You won't.)
So your carry over losses will just continue to grow each passing year. You can't "realize" those losses until the tax year you sell/dispose of the property.
EXCEPTION: If you are "actively involved" in the rental activity (most landlords are) then you are allowed to claim up to a maximum of $25K of "excess" losses each year against your other "ordinary" income. (The losses that exceed the rental income.) So it's perfectly possible that while you're taxable rental income will be zero each year, you will never have any carry over losses to get transferred to the next year.
