Renting out portions of personal residence--tax question
I bought a property last December that is unique in that it has a rentable cottage, basement apartment, and 6,000 ft 6 stall horse arena (all despite being a "single-family" residence). We are currently renting the cottage and are remodeling the apartment currently. If all are rented we will be pulling in about 85% of our mortgage, which is great! This also means that our income will increase by over $20k.
Anyone out there know what the best tax hedge is for this type of income? Should I depreciate the property even though it's my personal residence? I can still write off expenses like utilities, right? Septic repair, etc?
Any advice from folks who know about this type of situation would be very helpful. I already pay enough taxes as it is...Thanks!