Primary residence is a multi-family rental

Hello, I am planning to purchase a 3-family home and use one unit as my primary residence while using the other two units as rental property. How do I account for this in ESPlanner Plus? Currently I've created my primary residence as a rental with a token rent ($10) and put the entire residence in the Real Esate section, but I wonder if this will account for it properly. In reality, I should be able to deduct mortgage interest for the portion I will be occupying, and I don't think this method would do that.


dan royer's picture

Yes, this sounds a little tricky and perhaps others have a better solution. But could you just put the whole house under Primary Residence so you can get the full mortgage deduction and account for your taxes, insurance, and mortgage . . . and then set up a series of special receipts for your rental income?

I'm not an expert by any means, but we own a 2-unit building and I have been thinking about this a bit. Both units are used by family now so I treat it all as Primary Home, but in past one unit was rental and in the future one or both units may become rental again. My thought in your case is to use 1/3 of the building asset value under Primary Home, and the other 2/3 under Real Estate. You'll have to allocate the mortgage and expenses in the same way, but that will line up with the allocation you'll have to use for your taxes. 1/3 of the mortgage interest will go in itemized deductions while the other 2/3 plus the rental income, expenses and depreciation will go on schedule E.

I haven't tried this in ESPlanner yet to know if it is a solution. Seems it should work, though some things like depreciation which ESPlanner calculates are a black box. Hope this helps.

Great ideas. Thanks -- I'll give them a try! I was hoping to find a simple solution, but I guess I can multiply by 1/3 without too much headache.

We use cookies to deliver the best user experience and improve our site.