Hello,
I'm trying to figure out how to enter this situation into TurboTax:
One house with an ADU that effectively has 3 units:
- Main home upstairs: Used as my 2nd home.
- Main home downstairs: In the process of being renovated/improved with the goal of renting it out when done. Not yet "in service".
- ADU: Used as a rental all the time.
Main home and ADU have different addresses. Example: Main Home at 123 Elm St and ADU at 123A Elm St.
Given the differences, I'm thinking I should treat them as 3 separate properties (one personal use, one intended rental, and one active rental). Does that seem like the optimal way to go?
I've determined percentages for allocating expenses among the 3 and have all expenses tracked per-unit, so I can produce separate depreciation schedules and expenses for each.
Also, I would like to use some of my expenses from the downstairs unit to offset income from the ADU rental, but the downstairs is not yet in service as a rental. Can I do this for some expenses, or will I need to wait until it's placed in service to begin taking deductions? It would make sense that they are part of the same enterprise and I have one project that is generating revenues while another is losing money (in investment mode) to offset those revenues, but I think I have to wait to depreciate improvements over 27.5 years and "startup costs" over 15 years starting with when the unit is placed in service as a rental. This stuff is complicated, but I feel like I'm not too far from understanding the basics.
Thanks!
