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I have an owner occupied fourplex. I thought 100% of repairs are allowed. TT is taking only 75%. I understand 75% is correct for insurance, mortgage, etc. What to do?

 
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2 Replies
pk
Level 15
Level 15

I have an owner occupied fourplex. I thought 100% of repairs are allowed. TT is taking only 75%. I understand 75% is correct for insurance, mortgage, etc. What to do?

Did you mean that the repairs were only to the  rental units  ( units 2, 3, or 4 or to all three ) or is to the  whole property ?  Note that if you declared that only 75% of the property is rented out , TurboTax would therefore assume all expenses  are to be  allocated as 75% to rental and  25% to personal usage.  Suggest, you separate  out and report the incomes and expenses ( repair/ maintenance/ mortgage interest/ insurance/utilities etc. etc ) on a per unit basis ---  that is  property A, property B and property C -- that will make life easier  for tracking  details.   You may also have to plan  for the time when you dispose of the property  -- sell the  whole quadplex  as one or  unit by unit --- your own unit may be eligible  for  gain exclusion while the  rented units  will need to  recognize depreciation.   If this is your first time, suggest seeing a professional so things can be set up correctly ( thus avoiding future  headaches ).

Carl
Level 15

I have an owner occupied fourplex. I thought 100% of repairs are allowed. TT is taking only 75%. I understand 75% is correct for insurance, mortgage, etc. What to do?

Understand also that there is a difference between repairs and property improvements, and this matters big time.

RENTAL PROPERTY ASSETS, MAINTENANCE/CLEANING/REPAIRS DEFINED

Property Improvement.

Property improvements are expenses you incur that add value to the property. Expenses for this are entered in the Assets/Depreciation section and depreciated over time. Property improvements can be done at any time after your initial purchase of the property. It does not matter if it was your residence or a rental at the time of the improvement. It still adds value to the property.

To be classified as a property improvement, two criteria must be met:

1) The improvement must become "a material part of" the property. For example, remodeling the bathroom, new cabinets or appliances in the kitchen. New carpet. Replacing that old Central Air unit.

2) The improvement must add "real" value to the property. In other words, when  the property is appraised by a qualified, certified, licensed property appraiser, he will appraise it at a higher value, than he would have without the improvements.

Cleaning & Maintenance

Those expenses incurred to maintain the rental property and it's assets in the useable condition the property and/or asset was designed and intended for. Routine cleaning and maintenance expenses are only deductible if they are incurred while the property is classified as a rental. Cleaning and maintenance expenses incurred in the process of preparing the property for rent are not deductible.

Repair

Those expenses incurred to return the property or it's assets to the same useable condition they were in, prior to the event that caused the property or asset to be unusable. Repair expenses incurred are only deductible if incurred while the property is classified as a rental. Repair costs incurred in the process of preparing the property for rent are not deductible.

Additional clarifications: Painting a room does not qualify as a property improvement. While the paint does become “a material part of” the property, from the perspective of a property appraiser, it doesn’t add “real value” to the property.

However, when you do something like convert the garage into a 3rd bedroom for example, making a  2 bedroom house into a 3 bedroom house adds “real value”. Of course, when you convert the garage to a bedroom, you’re going to paint it. But you will include the cost of painting as a part of the property improvement – not an expense separate from it.

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