Is my property a depreciable asset if I rent out rooms?
Should I enter my entire property as a depreciable asset since I rent rooms out in it? Or should I just enter a percentage since I live in it as well?
Answers
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If you are renting out part of your home and have mixed use spaces (like a kitchen, living room or bathroom) you will need to prorate your expenses accordingly.
You can use any reasonable method for dividing the expense. The two most common methods for dividing an expense are (1) the number of rooms in your home, and (2) the square footage of your home.
When you enter the rental as an asset you will enter the cost basis amount based on the rental usage only. For example, if you have a 1500 square foot home and half of it is used as a rental, you will enter half of the purchase price for the cost basis of the rental. -
You can only depreciate the cost of the building — not the land. So before you divide up the cost between business and personal, you need to subtract out the cost attributable to the land.
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Yes @JMSSGV is correct! In the depreciable asset section FreeTaxUSA will ask about land costs for real estate assets. This amount will reduce the basis for depreciation.
