Owner Occupied Duplex - Improvements/ Taxes

[Marco Fields]

Thanks to motivation from listening to BiggerPockets popcasts, this year my fiancé and I finally paid off our auto, credit card, and student loan debt before deciding to purchase our first home. We decided to go the owner/ occupied duplex route as it seemed to be the smartest option financially. It took some convincing but she is now 100% in favor of the idea after learning a little bit more about the tax advantages. So, we live in one side of the duplex and have a tenant in the other. Our goal is to fix up and do some updates to the side we live in and then move to the other and do the same. Long term plan is to hold onto the property and purchase another in the next 3-5 years and fully rent out the current property and then repeat until we build up a nice portfolio for retirement.

My question (that I can't seem to find an answer to anywhere) is how we can maximize our the tax benefits by writing off/ deducting expenses incurred from the updates. It seems like you can't deduct any updates unless they are done to the tenant side. We don't want to put off and invade our tenants space by engaging in multiple projects but we don't want to miss out on the tax deductions for the improvements.

One way around this that we thought might work would be to do all of the improvements/ updates in the unit that we live in in one year and then move to the other unit before year end and claim them as tenant maintenance expenses. Is this even possible? Could we just do the updates to our side and then say they were done on the tenant side since we will be moving over to that side anyways? (I feel like this option is riding a thin line.)

We don't want to risk any tax/legal consequences by doing this incorrectly but want to figure out the most advantageous route to go. Does anyone have any advice for us that they would be willing to share?

Thank you in advance!