rental property

[vhornaday]

built detached garage at my home with apt over it - finished in June 2020.  Took out a second mortgage to pay for it.   I cant figure out what to select in turbotax to get the right breakdown on schedule e.  Multifamily or single family and then on next page do I check I am renting part of my home and or rent out a unit in a multi unit property.   It is expensing too much toward the apartment,  For example, turbo tax is allocating too much of mortgage interest rather than just the interest on the second loan.  would it be better to just consider it a totally seperate single family residence and then calculate shared expenses based on square footage such as utilities and property taxes?

[Carl]

Until your property tax appraiser says otherwise, your property is single family. While it may seem proper to select multi-family, if you were "called out" to prove it, you can't provide any officially recognized documentation for that. (your PA very well "may" change things on their next tax appraisal, but I seriously doubt it.)

Treat the structure as it's own entity, since being detached that's exactly what it is. Do take note that if the garage (or parking space in it, if it holds more than one vehicle) is not for the exclusive use of the tenant, then you can't claim the entire interest on the 2nd mortgage as a rental expense.

Note also that you *must* give some value to the land. If anything, the land which the new construction physically sits on. For example, if you took out the loan for $50K and that's what it cost to build the place, then your cost would be say $60K with $10K allocated to the land. (I just picked numbers out of thin air here.)

Take note that I am assuming the structure has it's own self contained living, bathing, cooking facilities and that the utilities are metered separate from your main residence.