Investors & landlords

NONE of those are used ... your basis equals the purchase price of the home + cost to buy + improvements.

 

If you want you can split out the ADU as a separate basis and enter it as such on the Sch E.  Then the portion of your home you rent  would be a separate Sch E entry.

 

The common expenses need to be prorated in a reasonable fashion ... by square footage or by occupancy (which is useful for utilities).

 

 

For the first year I HIGHLY recommend you seek professional assistance to get this set up correctly due to the mixed use divisions.  And/or  do some reading :  https://www.irs.gov/forms-pubs/about-publication-527

 

Lastly depreciation is required ... it is NOT optional.  

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