Taxes/ question for accounants

[Gavin Wynn]

Hey, This is a unique situation, I purchased my second property in June 2024, a single-family home that used to be a duplex, and is still zoned as a duplex ( remains 2 addresses). I am converting this back to a duplex, going to live in one half and rent out the other. Do I have to complete the separation of units by January 1st to write off half of my closing costs/other expenses? Or can I still write off the closing cost in 2026 if I am not done with the separation by January 1st, 2025? This might be a stupid question but thanks in advance!

[Johan Garcia]

Quote from @Gavin Wynn:

Hey, This is a unique situation, I purchased my second property in June 2024, a single-family home that used to be a duplex, and is still zoned as a duplex ( remains 2 addresses). I am converting this back to a duplex, going to live in one half and rent out the other. Do I have to complete the separation of units by January 1st to write off half of my closing costs/other expenses? Or can I still write off the closing cost in 2026 if I am not done with the separation by January 1st, 2025? This might be a stupid question but thanks in advance!

Just wanted to add that more information might be helpful. You mentioned this is your second home—are you treating your first home as an investment property now that you're moving into this one?

In general, for tax purposes, you can begin to deduct expenses such as depreciation once the rental portion of your property is placed in service, meaning it's ready and available for rent. The placed-in-service date can be any date during the year; it doesn't have to be January 1st.

Regarding closing costs and other expenses, many of these costs are added to your property's basis and recovered through amortization over time once the property is placed in service. However, some expenses, carrying costs may be deductible in the year they are incurred, even if the property isn't yet rented out. So, you don't necessarily have to complete the separation of units by January 1st to start deducting expenses.

Facts are important but overall, think of the place in date as the date you can start to deduct some of these expenses.