UTILITIES

[Dubostica]

Two family house . I leave in first floor and tenant uses  2nd floor and attic.

Heat & hot water boilers located in the basement and i pay for the gas for all.

Each floor has 5 radiators basement has none

They use the attic and attic is electricity heating and i pay for that as well.

Would  correct allocation for the schedule E be that i deduct 50 % of the gas and 100% electricity since i pay for everything ?

[Carl]

For utilities, you have either of two methods you can use, and you can switch methods each year if you want.

Method 1:

Based on number of people in the house. If you have 5 people and two of them are renters, then utilities are allocated to 20% per person. With two renters, 40% of your utilities are a SCH E decution.

METHOD 2:

Based on square footage that is exclusive to the renter. Assume 5 people in the house, and you are renting one bedroom to a couple. That one bedroom accounts for 10% of the total floor space that is exclusive to the renter. You can claim 10% of your utility expenses on the SCH E.

[Dubostica]

My situation is this:

each floor has same amount of square footage (900)

4 renters use 2nd floor with 2 bedrooms and they use attic with additional 600 sq. feet as bedroom

9 people all together 4 of them are renters .

what would my percentage be on schedule E

Thank you very much

[Carl]

I see a total of 2400 sq ft. 4 renters are using 1400 sq ft, that I assume is space that is "exclusive to the renters" and not shared with non-renters. That's 58% of the floor space.

You don't say how many total live in the house. But if I assume the owner and their spouse/partner, that gives a total of 6 people with four of them renters. So that would be about 16.6% per person with 67% of the utilities used by the four renters.

Keep in mind the choices only apply to utilities. It does not apply for other things such as depreciation. Depreciation is based on sq ft that is exclusive to the tenants, regardless of the number of tenants. So you should be depreciating 58% of your structure cost basis over 27.5 years. Likewise, the percentage of your deductible mortgage interest is also based on percentage of sq ft exclusive to the tenants.