Oakland, CA · Member since 2015 · 109 posts · 41 votes
hi all,
I'm on the cusp of buying my first ever property and it will be an owner occupied duplex. I'm trying to navigate the maze of tax deductions and was hoping to get clarification/confirmation on a few things:
I can deduct 50% of the mortgage interest and property taxes
I can deduct 50% of the homeowners insurance
I can depreciate 50% of the structure value over 27.5 years
I can deduct 100% of all repairs maintenance for the rented unit
I can depreciate 100% of improvements for the rented unit
I can depreciate 50% of improvements that affect both units e.g. a new roof
Some other questions:
Are all of those statements true?
Is there anything else I've missed, or any secret deductions I should know about?
How is depreciation affected when my home value increases? Do I need to get an appraisal to confirm the new value and then change my basis based off of that?
Investor · Pawleys Island, SC · Member since 2008 · 1k+ posts · 837 votes
10y
You have pretty much covered the landscape. Just to clarify depreciation of the structure. You depreciate the actual COST of the dwelling structure even if the value is higher than what you actually paid.
For the homeowners insurance, be careful. Discuss your needs thoroughly with your insurance agent. You may want separate policies for your residence unit and the rental unit. For the rental unit policy, be sure you include a business liability rider for the maximum amount offered by your insurance carrier and a lost rent rider if you have to displace your tenant in the event of a covered event.
Even if your carrier will extend liability from your homeowner's insurance policy to your rental unit, you may still want a separate rental dwelling hazard insurance policy. Discuss the pros and cons with your insurance agent so you can make an informed decision.
Oakland, CA · Member since 2015 · 109 posts · 41 votes
10y
Sweet. Glad I have some sense of all the terminology.
In terms of insurance, I think I'm covered.They're aware that it's half rented and I have loss of use and liability on there.
In terms of depreciation, how does that work with property that may not last the full 27.5 years? Say I buy a dishwasher and it breaks after 10 years, or I have to replace a roof again after 20 years? What happens to those lost years of depreciation?
Tax Accountant / Investor · Chico, CA · Member since 2016 · 52 posts · 23 votes
10y
You have the right idea. IRS publication 527 gives a few examples that may be helpful for you. The IRS allows you to allocate the expenses based on whether the expenses are used for rental purposes or used for personal purposes.
Chicago, IL · Member since 2016 · 238 posts · 68 votes
10y
Sorry to jump on an old thread, but I found this while searching and was wondering if maintenance was the same idea, 50% each for the yard and a garage if it's shared?
Also, for anything that is for both units, do I also cut my mileage in half for write off purposes?