Entire home footage and rental property allocation

[jj2406]

I own a two family property where I live in one unit and rent out the other. There is also a freestanding garage and a below grade basement where I rent out one room for tenant storage and use another room as a home office.

1) When I calculate entire home footage for splitting the rental property expenses (e.g. to split the mortgage interest, etc), do I count in the basement and the garage? what about the backyard (no building, just an open space)?

2) Does the rental property allocation have to be the same for calculating rental expenses and assets/depreciation? My tenants took a basement room for storage in 2019. I have adjusted the rental property expenses. Do I need to update the previously set allocation for assets/depreciation as well?

3) Under home office, Turbotax asks for Entire Home Footage. Do I enter the entire property? or take out the rental portion?

[Carl]

1) When I calculate entire home footage for splitting the rental property expenses (e.g. to split the mortgage interest, etc), do I count in the basement and the garage? what about the backyard (no building, just an open space)?

The yard is not enclosed living space. Period. When being asked for square footage, it's asking for square footage of the "ENTIRE" building/structure, and then the square footage that is "exclusive to the renter".  On that the program will figure the percentage of floor space that is exclusive to the renter and tthat's how things will be allocated.

2) Does the rental property allocation have to be the same for calculating rental expenses and assets/depreciation?

A definitive YES for figuring the depreciation percentage and what percentage of your mortgage interest, property taxes and insurance is claimed on SCH E. But rental expenses (utilities and the such) can be based on the same percentage, or based percentage-wise on the number of people that occupy the entire structure provided all occupants of the structure have access to the utilities being allocated to SCH E. The one and only thing that you can not allocate to the SCH E *at all* is the land line telephone bill.

My tenants took a basement room for storage in 2019. I have adjusted the rental property expenses. Do I need to update the previously set allocation for assets/depreciation as well?

You don't "update" anything. If you converted more space from personal use to rental use, then you enter it as a new physically separate asset allocated to rental use. Or you can enter it as a physically separate unit on SCH E. Either way works.

3) Under home office, Turbotax asks for Entire Home Footage. Do I enter the entire property? or take out the rental portion?

A home office is not allowed for your W-2 job.

A home office is not allowed for SCH E income unless you are a real estate professional. So this question is moot. (Renting out part of your home or a unit in a duplex you own does not qualify you as an RE professional)

However, if you have a separate SCH C business that you're claiming a home office for, you don't "take out" anything.

[jj2406]

Thank you for your answers, Carl! I have a few follow up questions.

1) Thanks. This is clear now 🙏

2) When I enter the basement storage room as a new physically separate asset allocated to rental use, do I also put it on the 27.5 depreciation schedule? 

3) I do have a separate SCH C business that I'm claiming a home office for. Say the entire building is 1000 sqf, within that, rental is 400 sqf, my primary residence is 350 sqf and I use 250 sqf for my business. When TurboTax asks for "Entire Home Footage", do I enter 1000 sqf (entire building) or 600 sqf (the space I use for living and biz)? I guess I'm not clear what the "home" means here in the question.

Also, I found I left out the closing cost when calculating the cost basis for rental property allocation. How can I amend that? Or is it okay to leave it as is?

[jj2406]

Found an answer in the Turbotax program to question 3) --

What if I rent out part of my home to somebody?

If you rent out part of your home, you should subtract the square footage of that rented portion from your total square footage of your entire home.

For example: if your home is 2500 square feet and you rent out 500 square feet then enter 2000 as the square footage for the entire home.

If you own your home:

If you rent out part of your home, you should subtract the mortgage amount you entered for your rental from the total mortgage interest amount.

For example: if the total mortgage interest you paid on your home was $10,000 and $500 of that was the amount for the area you rented out, then you should enter $9,500 as the total mortgage interest.