topic In 2020 I moved out of the duplex I own and started renting that side. I've always rented the other side. How do I accurately answer the TT form questions on conversion? in Investors & landlords

In 2020 I moved out of the duplex I own and started renting that side. I've always rented the other side. How do I accurately answer the TT form questions on conversion?

s3ripber — Thu, 18 Mar 2021 16:42:42 GMT

Property is in my name. I've always listed a a #2 multifam on Sch E. The "other" side was rented all 365 days.

Re: In 2020 I moved out of the duplex I own and started renting that side. I've always rented the...

ColeenD3 — Sat, 20 Mar 2021 22:07:43 GMT

It is a multi-family property, with differing rental days and separate expenses per unit. Enter each apartment as a single-family unit, and prorate common property expenses (such as water/sewer) between them.

Re: In 2020 I moved out of the duplex I own and started renting that side. I've always rented the other side. How do I accurately answer the TT form questions on conversion?

Carl — Sun, 21 Mar 2021 00:43:13 GMT

In a nutshell:

Change absolutely nothing on the existing rental unit. Not one single thing. Then enter the other unit as a physically separate property.

If you need detailed help on this, then I need to know how you've been doing things for the existing rental unit.

Treating the rented unit as a physically separate asset with 100% rental use and just claiming 50% of the expenses? Or treating the unit as a 50% unit where you enter 100% of the entire building expenses and let the program "do the math" to figure what percentage of those expenses to apply to the SCH E?

The more details and facts, the better.

Re: In 2020 I moved out of the duplex I own and started renting that side. I've always rented the other side. How do I accurately answer the TT form questions on conversion?

Lewis_24 — Thu, 01 Feb 2024 00:29:41 GMT

I have this same question. I had entered it as 50% rental usage and added 100% of the expenses and let the program do the math. I considered that I used my unit as a personal residence for the first 4 months (33.3% of the year) so I thought I'd change the rental usage percentage from 50% to 83.3%. I reached this number by considering I used 1 unit 100% as a rental for the year and the other unit was used as a rental for 66.67%. (50% plus 66% of the other 50% = 83.33%)

Re: In 2020 I moved out of the duplex I own and started renting that side. I've always rented the...

AmyC — Thu, 01 Feb 2024 00:41:26 GMT

If this is your first year with the duplex with both sides rented, I would make it two separate properties. Enter each one as a single unit. This saves a lot of work and trouble down the road. You might sell one unit and keep the other someday. Crazy things happen and with them separated, you will have an easier time. If you want to do it as one unit and use 83.3% for things this year, you can. The IRS wants to see consistent treatment.

See Pub 527

@Lewis_24

Re: In 2020 I moved out of the duplex I own and started renting that side. I've always rented the other side. How do I accurately answer the TT form questions on conversion?

Carl — Thu, 01 Feb 2024 04:56:57 GMT

@Lewis_24

I had entered it as 50% rental usage and added 100% of the expenses and let the program do the math.

Hope you didn't do that for "all" expenses - especially insurance. With your method (which is fine) I don't think the program correctly prorates the property insurance, since that is not a deductible expense on SCH A for the personal use percentage. I would suggest you check the numbers on SCH E and the associated worksheets to confirm.

Re: In 2020 I moved out of the duplex I own and started renting that side. I've always rented the...

Lewis_24 — Thu, 01 Feb 2024 05:20:06 GMT

Unfortunately it's not my first year with the duplex as I filed two previous years that I was living in one unit and renting out the other.

I do see a problem with my logic now because the software is set up to depreciate only 50% of the property since only half of it was a rental.

Going to have to think on this a bit more.