I own a duplex, and I live in one half and rent out the other. I have questions about how to approach the mortgage interest and property taxes.

[warrensferris]

The taxes and interest are included on the same 1098 form. Additionally, the insurance paid is included on this form. Should I just divide these in 2 and report half of each for the rental and in my deductions?

I put 100% for the rental property because I bought a lot of tools and supplies to make minor repairs to the other side in 2016. I don't want to have half of that allocated as personal use, as it was all used entirely for the rental side.

[PatriciaV]

Yes, when you have expenses that are shared between your rental property and your home, you must allocate the costs using any reasonable method. 

Most taxpayers allocate based on square footage or property value (if known). If the two units in your duplex are identical, you may report half of your shared costs as Rental Expenses on Schedule E. 

Costs that apply only to the rental unit should be reported 100% as Rental Expenses.

The easiest way to find Schedule E in TurboTax is to open your return and use the Search box at the top right side of the TurboTax header. Enter "schedule e", hit Enter, then click "jump to schedule e". This will take you directly to the start of this section.

Or go to My Account >> Tools >> Topic Search. Type in "schedule e", then click the topic in the list.

(If you are using the mobile app and don't have My Account or Tools on your screen, try logging into TurboTax from a laptop or desktop browser.)

[warrensferris]

How do I report the costs that apply only to the rental unit as 100% Rental Expenses? Once I set the "Rental Use Percentage," it appears to use a 50% allocation for all of the expenses that I enter. Most of the work that I did was not shared costs and should not be 50% allocated, but I don't see how to differentiate between shared costs and costs that apply only to the rental unit in the expense section.

Would it be better to treat the rental side as its own property, which is 100% rented out?

Also, I still don't know to treat the mortgage interest and taxes for the property. I have a single mortgage for the duplex, should I submit 100% of the interest and taxes for the property as expenses for the rental? Or should I divide it in half and report half of it in the "Deductions & Credits" section? I feel like I shouldn't be reporting the same information twice, but I'm not sure where it belongs.

[PatriciaV]

We recommend setting up the rental unit of your duplex as a separate property in TurboTax. The other unit is your primary residence and is not set up for Schedule E.

This allows you to separate the income, expenses, and cost basis using your own calculations. If you do this, you may allocate the shared expenses (like mortgage interest and property taxes) however you wish. If the units are identical, split the shared costs in half. Then report the entire rental portion on Schedule E (rental use = 100% for this  unit). The portion that applies to your residence would go on Schedule A (Deductions & Credits).

Definitely do not report any expense twice.

The ultimate benefit of separating the properties is tracking the history for each unit, especially if the use changes in the future.