Got it. So nothing was a rental until you become the sole owner of the property. That actually makes things much simpler than what I was expecting.
In 2019 I bought his share by refinancing it based on the appraised value.
So basically, you did two things in one fell swoop (in a weird kinda sense).
1. You refinanced your half
2. You purchased his half.
As of 2019 I own the home entirely.
So that means that, on your 2019 tax return you got to report 100% of the mortgage interest *on the new loan only* on your tax return. You also got to deduct the financing fees on the new loan entirely. So you won't have any such fees to amortize on the new loan for the 2020 tax return.
I was able to rent the unit upstairs in April 2020 and I’m still living in the property (unit first floor (owner occupied).
There are several ways to do this. I'm going to recommend the 50/50 split manually, between your primary residence unit, and the rental unit. I'm also assuming that each unit has it's utilities metered and billed separately (water, electric, cable, etc.)
I suggest you treat the rental unit "as if" it was a physically separate unit, that includes one half of the land. Therefore you report that as a single family unit on the SCH E. You'll claim 1/2 of the mortgage interest, property taxes and property insurance on the SCH E as a rental expense. If utilities are biled separately then there is no splitting of utilities. Otherwise if utilities are not billed separately then you only claim 1/2 of the utility expenses on the SCH E.
Now understand this on splitting the utilities and property insurance.
You can only split utility expenses that are truly shared. For example, if there is only one telephone line into the property, you can not split that. (The IRS addresses hard wired telephone lines specifically in their examples.) If you have cable (TV and/or Internet) and it's not shared with the tenant, then you can't split that.
As for the property insurance, you can't deduct property insurance as a SCH A deduction. The insurance you pay for your personal residence, 2nd home or other "personal use" property is just flat out not deductible anywhere on your tax return at all. So you have to pro-rate that and can only deduct on the SCH E, that portion of the insurance that applies to the rental portion. Another thing about property insurance too, and this is important.
If the insurance policy you have is a "homeowners policy", double check it. Typically a homeowners policy does not protect you when you are using the property for "other" than it's insured purpose. So check with your insurance agent to see if you need to purchase a separate "rental dwelling policy" for the rental portion. This will help in several ways.
1. Your "homeowners policy" will protect your unit and your personal belongings in that unit.
2. A "rental dwelling policy" typically only protects the structure and does "not" protect the belongings of the tenant, thus making such a policy cheaper. A rental dwelling policy will include at a minimum, $300K of liability and will pay up to 80% of "lost rents" for anywhere from 6 months to 12 months, should the property become uninhabitable due to fire or other disaster.
3. As for your tenant, I always inform my tenant that they may want to buy a "renters insurance policy", which can be had for less than $200/year. Such a policy will protect the tenant's property so they're not left completely destitute should the rental dwelling they are paying rent for burns to the ground or get destroyed by other disaster, with everything they own in it.
As for the split between SCH E and SCH A, this makes your life easier if things change in the future. For example, if you mvoe out of your unit and decide to rent it out, you just add it to the SCH E as a completely new rental property. If you decide to sell one unit, it doesn't matter which one, reporting the sale is simpler. Though I doubt you'd sell only one unit, when they are arrainged in a upstairs/downstairs configuration. But you never know!
