Donna owns a two-family home.She rents out the first floor and resides on the second floor.The following expenses attributable to the total building were incurred by Donna for the year ended December 31,2011: In addition,the depreciation attributable to the first floor would be $2,000.What is the total amount of the expenses that Donna can deduct on Schedule E of Form 1040 (before any limitations)?

Question

Donna owns a two-family home.She rents out the first floor and resides on the second floor.The following expenses attributable to the total building were incurred by Donna for the year ended December 31,2011:  In addition,the depreciation attributable to the first floor would be $2,000.What is the total amount of the expenses that Donna can deduct on Schedule E of Form 1040 (before any limitations)?

Quizplus · Accepted Answer

The expenses that can be fully deductible on Schedule E are:
- Real estate taxes: $1,200
- Insurance: $800
- Repairs: $1,500
- Utilities: $350 (only the cost of utilities for the first floor, since Donna lives on the second floor)
- Other expenses: $1,000

Total deductible expenses are $4,850. The depreciation of $2,000 is not currently deductible but can be used to reduce any future taxable gain when the property is sold.

Donna Owns a Two-Family Home