How to do Taxes for a Househack Duplex?

Question

Hey  team, dumb question: Where should I start looking for tax breaks as  someone doing a house hack via a duplex? I have my 1098 from my mortgage company, and kept receipts from some big repairs, but I also recall we're able to write off depreciation? Or maybe I'm over complicating it?  Since it's my primary residence and not solely an investment property  than I can just think of it like that? Thanks in advance!

Moe Khan · Answer

@John Smith, lot of people will jump here and ask you to talk to your CPA. But since you are house hacking and do not own 20-30 properties, why hire CPA? Also, if you blindly give stuff to your CPA, how will you learn about investment property?

I recommend that you spend sometime on turbotax. Make sure you fill up 50% of the property is rental, the software will generate Schedule E which IRS requires for rentals. it will calculate depreciation for the next 27 years. Believe me it is not that completed to understand depreciation. if you are still confuse and need help then look for CPA.

Erik E. · Answer

Hi Linda,  How do i search here for the several well known & well respected CPAs here on BP.Don't see a CPA option in the Network tab above?

Natalie Kolodij · Answer

I wuold recommend using @Linda Weygant for this. She works with a ton of investors who house-hack and is nothing short of an expert on the topic. I beleive she's actually accepting new clients right now too which is kind of rare.

Fredy Sandoval · Answer

The deductions have to be proportional to the amount of the property utilized for a rental.Generally speaking, since fifty percent of the square footage of this building is utilized as a rental property, you can write off fifty percent of tax-deductible expenses. Having said that, a CPA would know a lot more than me and can give you personalized advice.

Lawrence Potts · Answer

Like everyone has posted, we all recommend speaking with a CPA. More importantly, they're going to review your entire financial picture and see if it makes sense for you to depreciate, specific write offs, etc., this year. Just a reminder: depreciation must be recaptured at the sale of that property. So if you ever sell it, all the depreciated tax that you accepted must be paid back through the profit of the home. That's when you start looking into 1031, etc. But point being, do your due diligence and speak with a trusted CPA that owns real estate and can look at your situation and determine the best route for your long term goals, not just what is going to save you the most right now (at the detriment of your future goals). Ideally you would want to meet with your CPA prior to the year ending, but that's okay. Now is better than never.

Linda Weygant · Answer

House hacking a much more complicated calculation than a straight rental and I highly recommend getting with a real estate focused CPA to set this up right from the beginning.  You seem a little unsure on all the benefits and deductions that househacking can get you, so I imagine calculating the basis for depreciation, allocating land vs building (you're not allowed to depreciate land) and understanding what's deductible vs what's depreciable may all be areas that you're unsure of.

There are several well known and well respected CPAs here on BP that are set up to help you virtually.  I recommend discussing your needs with a few of them to see who can help you out.

Best of luck!

Ryan Thomson · Answer

@John Smith here are some things to consider with your taxes

1. Use an accountant to file your taxes. They are worth every penny.

2. While I lived in my house hacks I was able to depreciate the percentage of the square feet of the home that was occupied by my tenants.In addition to depreciating that percentage, you can also deduct expenses, that are for the whole house, at that same percentage above ( repairs, supplies, etc.). This was while I lived there. Once I moved out (to the next house hack) I was able to start depreciating the full value and deducting all of the expenses.

3. Make sure you talk to your accountant about Qualified Business Income Deduction (QBID). It basically allows for your first 20% of rental income to be tax free.

Paul De Luca · Answer

@John Smith

I recommend connecting with a CPA to handle your taxes so you're not leaving money on the table.

How to do Taxes for a Househack Duplex?

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