Finished refurbishing a commercial building in 2019. How to report, capitalize, and depreciate.

[beamersdad]

2.5 years ago, I purchased a 100 year old residence that was in bad shape. The property is now zoned commercial. 2019 the project was completed. It is now mixed use. The upstairs is a stand alone apartment that is rented out as an AirBnb. The downstairs consists of 4 separate professional offices. One of the offices is used by my business, which is a service related business. Currently, the accounting for the building (rental income and expenses) are recorded as a function of my business (separate profit centers from my business). When it comes to tax reporting:

1) Is it better to report as two separate businesses? One service and the other building rental?

2) If it's two separate businesses, would that require separate business licenses?

3) How should the building purchase and restoration be capitalized for depreciation?

[soultax09]

you should see a tax pro but two separate businesses is a personal matter and you may need separate licenses if the county or city or state requires one for each.....depreciation is 39 years because 80% of the building rents are not for residential dwelling units and add the building purchase price and restoration together to get the basis for depreciation.

[Carl]

Nothing happens on the tax front until the tax year the property is placed "in service". So if nothing was in service on or before Dec 31 of the tax year, you have absolutely nothing to report on your 2019 tax return.

On top of that, you state you have "mixed use" rental property. If you think you can deal with this yourself in your first year "in service", then welcome to your nightmare. You need professional help yesterday, if not sooner. Commercial rental property is depreciated over 39 years, while residential property is done over 27.5 years. You have mixed use between commercial and residential. Just one teeny-tiny mistake on your part will grow exponentially as the years pass. Then when you catch it (if the IRS doesn't catch it first) the cost of fixing it will make the cost of professional help seem like a pittance in comparison.

Please get professional help for at least the first year the property is in service.