Owner-occupied duplex, how to depreciate properly
Hi all, I'm owner-occupying one unit of a duplex and I'm wondering what is the best to report the depreciation if I convert the owner-occupied unit into a rental at a later date. The challenge I'm having is specifically regarding their depreciation schedule - since they are bought into service at different times, the depreciation schedule are different.
I can see a few options that could achieve this, but none is perfect:
1) treat the two units as two completely different properties with their own Schedule E's (each with half of the cost basis). This way the depreciation can be calculated correct, however, I'm unsure where to put improvements that applies to both units (e.g. a roof replacement).
2) put the duplex in one single Schedule E, with it's full cost basis, however, in the Asset Worksheet, report 50% of "Percentage of business use". then bump it to 100% for the year that the conversion happens. However, the "Percentage of business use" does not seem to apply to "I - Residential Rental" per the instruction on the right.
3) put the duplex in one single Schedule E, with half of its cost basis. In the year of the conversation, change the basis to the full basis.
For #2 and #3, how can I capture the fact that the two units were put into service in different years and thus should be depreciated differently?
Thanks in advance!