Depreciation of Household Items for Rented Part of Property

[PDAllen]

Single TP buys large single-family house in August 2015 and replaces all major appliances. In March 2016 he began renting out 75% of the house to a family of 4. TP still occupies a room and a bath. They all share the kitchen.

Can he take depreciation expense for 75% of the appliances starting in 2016? Looking forward and trying to figure out how to set this up.

[ATSMAN]

Single TP buys large single-family house in August 2015 and replaces all major appliances. In March 2016 he began renting out 75% of the house to a family of 4. TP still occupies a room and a bath. They all share the kitchen.

Can he take depreciation expense for 75% of the appliances starting in 2016? Looking forward and trying to figure out how to set this up.

Assuming it does not violate local zoning laws for rental this is similar to a duplex house in MA with common basement and common furnace, water heater, washer and dryer. Landlord live in one half the other half is rented. I do 50% depreciation on common appliances, structure etc.

[Gretel]

I do not have the final answer but believe you cannot take any depreciation for the kitchen. Key is 100% business use. Plus there are special rules for renting out the home you live in yourself. This is very different from a separate duplex.

[Rapid Robert]

This is a single dwelling unit (one kitchen) that owner uses personally? I think it falls under vacation rental rules. Depreciation is the third category of expense, only allowed up to amount of income. (Mortgage/prop tax is first, direct operating costs are second). (edit: typed this while Gretel was posting)

[TaxGuyBill]

I agree that you can not depreciate the kitchen itself (square footage), but I don't see why you can't depreciate the appliances. The appliances are not part of the "dwelling unit" that can require exclusive business/rental use. It is more comparable to depreciating a vehicle. You just depreciate the business (rental) percentage.

I could be wrong, but that is my take on things.

[PDAllen]

"You can deduct depreciation on the part of the house used for rental purposes as well as on the furniture and equipment you use for rental purposes."

https://www.irs.gov/publications/p527/ch04.html#en_US_2015_publink1000219159

[taxea]

determine the sqft of the rental portion of the residence by dividing the total living area (not garage, carport or outside patio) into the sqft of the bedrooms (and bathroom or more if there is one that only the renters use). Do not include any common areas (hallway, kitchen, livingroom, den etc) in your calculation.

The percentage amount is what you use for all depreciation and expenses.

[Kram BergGold]

Reasonable Method

Years ago I read in an IRS Pub that in this situation you use a reasonable method. At a seminar, a speaker once said do it the way you would do a home office.

[Gretel]

Years ago I read in an IRS Pub that in this situation you use a reasonable method. At a seminar, a speaker once said do it the way you would do a home office.

Now I am confused. F.e. if you have a computer in your home office that you use 90% for biz - this fact will disallow all of the OIH deduction because it's not 100% any longer.

[TaxGuyBill]

Now I am confused. F.e. if you have a computer in your home office that you use 90% for biz - this fact will disallow all of the OIH deduction because it's not 100% any longer.

Correct. That is why you can not deduct the 'space' of the kitchen. It is not 100% business/rental use. Only the 'space' of a home that you live in requires 100% business/rental use. However, you can still deduct the business percentage of other things, such as 90% of the computer (or appliances in the case of the OP).

[taxea]

Years ago I read in an IRS Pub that in this situation you use a reasonable method. At a seminar, a speaker once said do it the way you would do a home office.

I do a home office by sqft %age

[JON]

100%

The amount depreciated is what is used exclusively for rental, unless something very new has changed that.