House Hacking - Can only deduct rented bedroom square footage?

[Zach Adams]

Hi All, I have a house hack which is a duplex. I rent out the lower unit and for the upper unit, I rent 1 of 2 bedrooms. I was told that I could only depreciate 8.6% (square footage percent of the upper unit) and only deduct repairs done to the rented room alone. Is this correct? I was under the understanding that I could do a room ratio and deduct 50% of the upper unit expenses. If I am correct, does anyone know where this is in the IRS code allows this? Thanks. 

[Michael Plaks]

Quote from @Zach Adams:

Hi All, I have a house hack which is a duplex. I rent out the lower unit and for the upper unit, I rent 1 of 2 bedrooms. I was told that I could only depreciate 8.6% (square footage percent of the upper unit) and only deduct repairs done to the rented room alone. Is this correct? I was under the understanding that I could do a room ratio and deduct 50% of the upper unit expenses. If I am correct, does anyone know where this is in the IRS code allows this? Thanks. 

I wouldn't recommend that you DIY this. It's more complex than what you expect. You focus on one relatively minor issue while missing the bigger picture.

You have two properties, not one, for tax purposes. Your lower unit is a conventional rental. You have to allocate expenses between the two units, probably close to 50/50, and that includes depreciation. And you can claim the resulting loss if any.

Your upper unit however works completely differently, and you cannot claim any loss on your upper unit. At best, you can erase the rental income from this unit, but not go below zero. % of allocation is a separate technicality, and my colleagues already commented on it. 

Finally, some shared expenses related to the entire house such as landscaping have their own complexities.