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Updated almost 13 years ago,
converting owner-occupied duplex to fully rented duplex-depreciation question
Hello,
Was wondering if I could get some guidance from someone who may have some experience with depreciating rental property, specifically for tax purposes.
I have owned a duplex since 04 and have owner-occupied it. The other unit was rented out, and I've been depreciating the portion of the property that is r ented, as well as improvements I've been making so far. I originally had a preparer do my taxes for the first couple of years, but being the individual I am, decided to figure out the taxes myself. I've so far gone 2 years doing the taxes myself with no issues and have kept accurate records of all expenses, as well as how my assests are depreciating each year.
Central question I had was related to my conversion of an owner occupied situation to a fully-rented situation. The unit I occupied became rented in Aug2011, thereby making the entire property fully rented. I will now start depreciating the unit that went into use in August. Question I have is, how do I handle assets that are now 'in-common' between the 2 units, which are currently being depreciated, for example, I build a garage in 2007, 50% of which is going toward deprecication, and now, beginning in Aug 2011, I would like to indicate a full 100% depreciation.
Options I am exploring are:
(1) moving the garage from "Property used 50% or less in a qualified business use" on my form 4562 up to the section for 'Property used MORE than 50% in a qualified business use' section and set it to 70% , since the garage was effectively used for 70% of the year for a full business use, and recalculating a new 'basis for depreciation' amount on that line. Note , with this option, I imagine I can move from 70% to 100% on my taxes for year 2012.
Option (2) that is coming to mind is, make an additional new line item on a 4562 form that represents the garage (again), and indicate the amount that is available for depreciation and put it in the 'Property used more than 50% in a qualified business use' section.