Investment property with 2 houses with a single mortgage

[Southerntester]

We bought a property this past year that has 2 houses, each with their own mailing address. We are renting out each of the houses. The property was sold as a single offering and we have just one mortgage associated with it. The county will not allow us to separate the houses, against their land rules. How do we handle this years taxes for this property? Should we treat this as one property with all the associated expenses and rental income, including the mortgage? Or since they have 2 mailing addresses should we divide everything down the middle and consider them separate investments? Thanks...

[Anonymous_]

This scenario has the potential to create issues either way, but you might consider allocating a portion of the mortgage balance to each property in relation to their cost bases.

[Critter-3]

You can do it either way ... as one consolidated  property on the Sch E or  you can separate it onto 2 entries.  If there is a chance you will use 1/2 of the property for personal purposes ( you or a family member moves in ) in the future  then separating it into 2 entries would be wise.  Simply divide all the common expenses between the 2 units.