I've been renting 50% of my townhome since Sept '20. When entering rental asset depreciation, is 33% correct or 17%, since I only rent half of my home?

[christin-n-brand]

This is in response to the query "Percentage of the time I used this item for business in 2020" under "Improvements, furnishings, and other assets," one of the qualifiers for calculating depreciation.

[ColeenD3]

Please see this answer from Marketstar:  PY Rental

Mortgage interest and property taxes are divided between personal (Schedule A, itemized deductions) and rental use (Schedule E) proportional to the number of days used for each and square footage rented

Your formula is as follows: square footage of rental space/ total square footage of house times days rented/365 to be allocated as a rental expense

For instance, if you have $10,000 in mortgage interest and rent 25% of your floor space for 6 months, multiply 10000 x .25 x .5 = $1250 to allocate as a rental expenses. the balance as a Schedule A, itemized deduction.

So, you will enter a portion of mortgage interest and property taxes in both areas.

To enter personal mortgage interest and property taxes:

• Type in mortgage interest in the search box, top right of your screen
• Hit the Enter key
• Click jump to mortgage interest in the search results
• Follow the prompts and online instructions
• To enter rental expenses, type in rental property and follow the above instructions.

[Carl]

When renting out a part of your home or a part of other “personal use” property, there is one question in the Assets/Depreciation section that is wrong for “this” specific situation. You will see this question when entering the property in the Assets/Depreciation section. The question reads, “Percentage of time I used this item for this business in 2020 (e.g. 80%)” That question should read “percentage of floor space I rented out in 2020”. The program already “knows” the percentage of time, based on the date you entered above this question. So do not enter the percentage of time in this box. Instead, enter the percentage of floor space that was rented out.

If desired, you check the math by using the work sheet in IRS Publication 946, which starts at the bottom of page 38 at https://www.irs.gov/pub/irs-pdf/p946.pdf

For the property itself which is depreciated over 27.5 years, use table A-6 on page 73.

If the numbers you get don’t agree with what the program gets, then you answered a prior question incorrectly is all. Just work through the asset again and double-check all your answers and selections.

[christin-n-brand]

Thank you, this is exactly what I needed!