Tax situation with long term and short term rental.

[Joval Mathai]

I’m a first time home-buyer. I bought a multi-family in NJ in May 2023. 

We live in Unit 1 and Unit 2 is rented out. Unit 1 where we live has a basement that’s rented out on Short-term rental/Airbnb (with average stay per person < 7days).

I attempted to do taxes (married, filing jointly with my spouse) on turbo-tax. When adding the rental income for Unit 2, it asked for % sq.ft. rented out. Any deductions (including mortgage tax, insurance etc.) added there was split accordingly and corresponding amount was shown under rental deductibles. We did the same for short-term rental/Airbnb.

It asked not to separately add mortgage interest/insurance paid for the unit where we live in- but we don’t see it deducted anywhere else apart from the rental+Airbnb.

Any suggestions on how to deal this situation with using the same property as primary residence + rental + short term rental ?

Thank you in advance.

[Joval Mathai]

Quote from @Bill Hampton:

@Joval Mathai

I recommend finding a tax strategist that specializes in real estate taxation and STRs. You may want to consider working with your tax strategist remotely to expand your options.

I would also recommend looking for a tax strategist who is willing to work with you throughout the year, not just when preparing your tax return. You want an accountant that can help you strategize and who is responsive when you want to know the tax consequences of the decisions you are making throughout the year.

Good luck in your search.

 Thank you Bill for your advice.