Schedule E & C, building depreciation

[invprops]

We purchased a small commercial property in 2014. At that time it was solely occupied by a tenant. We filed a Schedule E for 2014 deducting the expenses, insurance, taxes, mortgage interest and building depreciation. In 2015, I started my company and moved into one of the two rooms in the building. We are currently sharing everything 50/50. For 2015 taxes, it is my understanding that I will need to file a Schedule E for my tenant's portion. I will be reporting the rental income and deducting 50% of the expenses (insurances, taxes, mortgage interest and depreciation) I will file a Schedule C for my business (sole proprietor) and deduct the other 50% of the expenses. Is this the correct way to file it? Shouldn't the building depreciation be 100% deducted on the Schedule E? Any advice is greatly appreciated.

[Mr. Sharma]

Keep the building 100% Schedule E.  Have your company pay rent, claim rental deduction on Schedule C, rental income on Schedule E. 

In 2015, consider payments made by Schedule C business for insurance, taxes, mortgage as rent expense.  Report that amount as rental income Schedule E.  Then claim those expenses against the commercial property Schedule E. 

[jwright]

Agree; pay yourself rent from the operating business (Schedule C) and report it on Schedule E.  This reduces your self employment tax.

[invprops]

Thank you for your advice.  I really appreciate it!