Hello,
I have a few questions related to this topic:
I understand that “Percentage of time I used this item for this business” should be based on square footage. You explained that it is reasonable to divide utility expenses by the number of people living there (in addition to a square footage approach). I’m trying to understand what methods can be used for expensing real estate taxes, mortgage interest, and insurance premiums. My home has three bedrooms. If I rent two of them out, is it reasonable to expense one third of the aforementioned expenses prorated based on the rental of bedroom 1 and another third prorated based on the rental of bedroom 2 and add these two numbers for a final expense cost? All other spaces are shared (laundry, kitchen, living, etc.).
Additionally, in this other post in which two rooms are rented, you suggest listing one property and each room as an asset of that property. If one room was rented May-august and the other May-November, should I still take this approach or should I mark them as completely separate rental properties? In particular, the number of days rented is different between the two. With the one property + 2 assets approach, I used the longer duration of the number of day rented. It’s unclear to me if number of days rented is just used by turbo tax to aid in prorating expenses (in which case it doesn’t matter since I opted to calculate expenses manually) or if it’s also used elsewhere, such as in depreciation.
On the “Tell us more about this rental asset” page, it has a place to enter a day in which the asset begins use in the business, but not a date to specify termination. One thought is to add an additional multiplier to the “percentage of time I used this item for this business” field. As an example, let’s say bedroom 1 is 10% of the floor space. The whole property was purchased 4/25/2022, and the lease agreement started 5/1/2022. 4/25/2022-12/31/2022 is 251 days that I owned the property in 2022. If it was rented 05/01/2022-11/30/2022, it was rented for 214 days. 214/251 = 85% of the duration that I owned the property. 10% * 85% = 8.5%. Should 8.5% be the input for “percentage of time I used this item for this business”? But then using this would affect depreciation of the room in future years. So, I’m not sure how to express that a lease was terminated before the end of the year for depreciation deduction purposes—unless it’s based on the number of days rented, which is a property-level value rather than an asset-level value, hence I am unsure if I should do the one property with two assets approach or two property (one for each bedroom) approach.
Thank you so much for your guidance!
