Mixed Use Rental Property

[Taxadvisor VA]

TTB:7-7 Mixed use property- In this section (bottom far right of the page), it mentioned that the deduction for expenses is limited to rental income. Client rented for 150 days last year (5 month/ 12 months = 41.7% rental usage). Therefore, personal use is > 14 days or 10% of the days the unit was rented at fair value. Therefore, a loss cannot be reported on the tax return. Expenses that are limited by this provision are carried over to future years.

The very next section is labeled exceptions. Certain expenses are allowed in full for mixed use property including:
- Rental portion of deductible Mortgage Interest.
- Rental portion of deductible Real Estate taxes.
- Rental portion of deductible casulaty and theft losses.
- Direct rental expenses such as rental agency fees, office supplies, and other expenses that are related only to the rental activity. These would be allowed at a 100%, correct??????????? __________________

Losses that are created by this last category are deductible. Is this correct? ___________________

No depreciation is allowed for this type property usage, correct?????????????? ________________

Thanks for your quick response as I have a client coming in 1 hour and 15 minutes.

Best Regards,

Taxadvisor VA

[Bees Knees]

1) and 2) Correct - direct expenses are always 100% deductible regardless of if there is a profit or loss, assuming it is an activity for the production of income.

3) yes and no - depreciation is subject to the loss limitation rules for mixed use property. Thus, if all other expenses exceed income, there is no income left to allow any depreciation.