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Rental of cottage on same parcel as main residence, on same tax bill, but with different mailing address

I rent out a cottage on the same parcel of land as my main residence (separate structure from main house). The cottage is included in the mortgage and both structures are on the same property tax bill. However, the cottage has a different mailing address. Would this be considered renting out part of my home? or A Unit in a Multi-Unit Property? Or Neither and just an independent rental property?

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Level 15

Rental of cottage on same parcel as main residence, on same tax bill, but with different mailing address

You may find it easier to treat it in the program as a duplex where you rent out one unit, and the other unit is your primary residence. This will be especially true if the rental cottage has it's own utility meters for electric, water and any other utilities. I'm also assuming that 2017 was the first year to rented this out. So I'm including additional information below I hope you find informative and helpful. Of course, you will have questions as you go and I know that. So please feel free to ask as those questions arise.

Now you can report it as it's own separate rental if desired. (There's pros and cons either way). But you need to be able to figure out the percentages of things like what percentage of the land are you allocated to the cottage, and what percentage of the total floorspace between the cottage and the house, is for the cottage, as well as what percentage of your cost (what you paid for the property) was paid for the cottage and the land you're allocating for the cottage.

Me personally, if the utilities are metered separately for the cottage, I'd report it as it's own physically separate single family rental home. I would not report it as renting out a part of my home, because the cottage is a physically separate structure that just "happens" to be on the same parcel of land my tax bill covers, and is included in my mortgage.

Setting this up in TurboTax the first year is going to be painful. But once it's done, its done. Following years will be a piece of cake after that initial setup.

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