Basic Schedule E question: Property Type selection

[jpg5]

Hello All, 

I live with my family in a single-family house. Last year we started to rent out the basement, which has its own entrance. 

Question: which of the 8 options for Type of Property should I select in this case?

I have searched for answers within the "2022 Instructions for Schedule E" and also within Publication 527, as well as some online searches, and have not been able to find a definitive answer. I'm very surprised at this. 

Thank you all in advance for any tips you can offer. 

Best,

JPG. 

[tagteam · Accepted solution]

The property is a single-family residence. The expenses will be allocated between the part of the property used for rental purposes and the part of the property used for personal purposes.

See https://www.irs.gov/publications/p527#en_US_2022_publink1000219159

[Critter-3]

If you are only renting out the basement and it is a self contained unit with a separate entrance then use (1) single family resident   and  you will need to divide all common expenses like the mortgage interest, RE taxes,  Insurance, utilities, etc.  and enter only the rental portion accordingly. 

[Carl]

The IRS pubs can not possibly cover all possible scenarios in a coherent manner. But I'm sure your situation is covered. It can be rather difficult to "dig it out" though, so to speak.

If you live in a 2-unit complex, where each unit has it's own entrance, bathing facilities, sleeping facilities and cooking facilities, then you basically have a duplex where you live in one unit and rent out the other. Ie; each unit can operate completely independent of the other without the sharing of "any" facilities. Otherwise, if one or more of those facilities are shared, you have a single family unit where you rent out "a part of" your primary residence.

You have several options for how to deal with this on y our taxes. Each option has it's pros and cons. I'll be happy to explain each when I know more precisely what you have. It does not matter if the utilities (electric, water, gas, etc) are metered separately or not. But I would need to know if they are or not so I can provide you more details on your tax reporting options.

[tagteam]

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@Carl wrote:

If you live in a 2-unit complex, where each unit has it's own entrance....

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@jpg5 clearly stated it is not a 2-unit complex but a single-family home with a basement that has a separate entrance (i.e., same address).

[jpg5]

Indeed, it is the same address.

The basement was unfinished until 7 years ago, when we put in proper floors, a kitchenette (sink, refrigerator, microwave, but no oven or stovetop), one closed off bedroom with a closet, and also a full bath (shower, toilet, sink).  It does have a separate entrance from the outside, but we can also access it from stairs leading from the kitchen on the ground floor. We share central HVAC with one thermostat on ground floor for the entire dwelling, electricity (all panels in basement), and water. Electricity, trash & recycling, Internet service is all provided to the entire home and not metered or billed separately. 

I just haven't felt comfortable selecting "Single Family Residence" as the property type - until now - because I did not rent out the entire building - just the basement.  

Thanks everyone for your replies. 

[tagteam]

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@jpg5 wrote:

I just haven't felt comfortable selecting "Single Family Residence" as the property type - until now - because I did not rent out the entire building - just the basement.  

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It is a single-family residence and you are renting a part of that residence.