How to set up an Owner Occupied Duplex Purchase

[g-k-]

How do I enter an owner-occupied duplex in TT? I bought the building in 2018 and live in one unit while renting out the other. So I need to set it up in TT such that the rental unit and my unit are defined correctly with the appropriate depreciation going to the rental.

When you set up a new rental property, you enter the purchase price, escrow fees etc. that was paid for the entire building (rental+owner unit). How do you adjust those amounts so that the correct depreciation amount is applied to rental and self-occupied units?

Some guidance will be much appreciated.  

Thanks,

[Coleen3 · Accepted solution]

It's easy. You will enter your information in the Rental Section. You will encounter the screen in the screen shot below. Check that you rent out a multi unit property. Next indicate that it is a duplex. Your expenses will be adjusted.

[g-k-]

Thank you Coleen. In the screen that you sent, I checked the multifamily (duplex) box and then had to enter the purchase price,  escrow fees etc. for the entire building and TT calculated a depreciation amount for the entire building, not for the rental unit. (based on the sq. footage, expenses have be split 40/60 between rental and mine). So I am a bit confused as this depreciation is not applicable to the rental. Thank you.

[Coleen3]

It should be. What month did you place the property in service? What is the cost? I will do it manually.

[g-k-]

Purchased on June 1st, 2018. Available for rent on August 1st, 2018. Purchase price 735K. The cost should be 40/60 based on square footage, i.e. rental unit is 40%, my own unit is 60%. Thank you!

[Coleen3]

So, $735k x1.364%x5/12x40% should be $1671.

[g-k-]

Sorry, is this the depreciation amount for the first year? Now TT shows a depreciation amount of $7058, which is for the entire building.  

[Coleen3]

Are all your other expenses divided propery? If we can wait until tomorrow, I can connect with you in the late am and get a diagnostic copy and look over your return. It's the end of the day for me.

[g-k-]

I have yet to enter the expenses. Do I need to enter the mortgage interest and RE tax expense also with a 40/60 split (i.e. if I paid 10K in mortgage interest, do I have to enter it separately as 4000 for the rental and 6000 for self occupied unit? Or do I enter 10K and TT splits it automatically 60/40? I would greatly appreciate it if you can follow up with me. Thank you.

[Coleen3]

Well, I would have said let TT do the division, but now...  I am curious what happens if you enter the whole amount. I am entering in my practice return. Unfortunately, when I do it, everything always works as it should.

[Coleen3]

Did you put any personal days?

[Coleen3]

I have played around with the program. What I came up with is saying that you will do the calculations and just enter 40% of the cost.

[g-k-]

Where do I enter the cost of improvements like a new wood floor in a rental unit?

[Coleen3]

Since it is new property and you hadn't depreciated it prior to the addition, add it to the basis.

[g-k-]

Thank you Colleen. Should I also add the closing costs to the basis, i.e. 735 purchase price + remodeling + closing costs = basis?