Duplex rental question

[JustChris]

I bought an empty duplex in 2023. I renovated one side and have a renter in it, the other side is currently being renovated and is still empty. They have separate addresses. I am using TurboTax premier. How do I account for the separate activities of each unit? Do I list them as separate properties, and split the purchase price and related info down the middle?

[RobertB4444]

Yes, separate them by address.

Since you are going to rent them and renovate them separately then dividing the property in two for tax purposes makes the most sense, yes?  Especially since one half is already available for rent and one half is not. 

@JustChris 

[JustChris]

Thank you.   Can you tell me the differences of how a rented property and a vacant property being renovated are treated, if any?  Are there things that are tax deductible on one side that are not deductible on the other?  I'm not sure if I am asking the right questions here.

[AnnetteB6 · Accepted solution]

Yes, there can be differences between a rented property and a vacant one.

The main key is whether you are advertising the vacant property for rent while you are renovating it.  If it is not being advertised, then it is not yet a rental property.  In this case, the cost of the renovations will be added to the basis of the unit when it is converted to a rental.  The expenses for utilities are personal expenses and not deductible.  You can claim the property tax for the empty unit as part of your Schedule A itemized deductions if you do itemize.  You may be able to claim mortgage interest for the empty unit if it can qualify as a second home for you.

The utilities and maintenance costs for the unit being rented are deductible since it has already been converted into a rental property.  The same is true for property taxes and mortgage interest (if any).  All of these expenses would be reported on Schedule E, along with your rental income.

@JustChris