Donald owns a two-family home. He rents out the first floor and resides on the second floor. The following expenses attributable to the total building were incurred by Donald for the year ended December 31, 2019: $$\begin{array} { l r }
\text { Real estate taxes } & \$ 1,800 \
\text { Mortgage interest } & 1,600 \
\text { Utilities } & 1,200 \
\text { Repairs (first floor) } & 1,400 \
\text { Painting (second floor) } & 400
\end{array}$$ In addition, the depreciation attributable to the entire building would be $2,000. What is the total amount of the expenses that Donald can deduct on Schedule E of Form 1040 (before any limitations)?

Question

Donald owns a two-family home. He rents out the first floor and resides on the second floor. The following expenses attributable to the total building were incurred by Donald for the year ended December 31, 2019: $$\begin{array} { l r } 
\text { Real estate taxes } & \$ 1,800 \
\text { Mortgage interest } & 1,600 \
\text { Utilities } & 1,200 \
\text { Repairs (first floor) } & 1,400 \
\text { Painting (second floor) } & 400
\end{array}$$ In addition, the depreciation attributable to the entire building would be $2,000. What is the total amount of the expenses that Donald can deduct on Schedule E of Form 1040 (before any limitations)?

Quizplus · Accepted Answer

Donald can deduct expenses on Schedule E that are directly related to the rental portion of the property, as well as a portion of the expenses that are related to the entire building. The real estate taxes ($1,800), mortgage interest ($1,600), and depreciation ($2,000) are fully deductible. The utilities ($1,200) and repairs to the first floor ($1,400) are also deductible because they are related to the rental property. However, the painting of the second floor ($400), which is his personal residence, is not deductible. Therefore, the total deductible amount is $1,800 + $1,600 + $2,000 + $1,200 + $1,400 = $7,000. However, since the question asks for the amount before any limitations and considering the options provided, it seems there might be a misunderstanding in the calculation or the interpretation of the question. Given the options, none directly match the calculated total, suggesting a need to reevaluate the answer based on the provided options and the typical approach to such a scenario on Schedule E. Typically, for a two-family home where one unit is rented and the other is used as a personal residence, you would allocate expenses between the rental and personal portions. Given the misunderstanding in the initial explanation, the correct approach based on the options would involve allocating expenses that are not solely for the rental unit. However, without clear guidance on allocation in the question, and based on the options provided, an accurate recalibration would consider only clearly deductible expenses for the rental part and common expenses (like real estate taxes, mortgage interest, and depreciation) that are typically prorated. The utilities and repairs for the rental unit are fully deductible, but without explicit instruction on allocation, the provided options do not align with the detailed calculation. Thus, the response based on the options given might not accurately reflect the intended calculation method without further clarification on allocation or considering potential errors in the initial question setup or answer options.

Donald Owns a Two-Family Home In Addition, the Depreciation Attributable to the Entire Building Would