Author Topic: Tax implications of buying a owner occupied duplex  (Read 1407 times)

sis

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Tax implications of buying a owner occupied duplex
« on: July 29, 2016, 08:04:11 AM »
I've been looking at homes in an area where it seems like you can get much more "bang for your buck" buying a duplex instead of a single family home.  We also have not been able to find a desirable single family home in the area that we are searching.  I have a few questions that maybe some of you have dealt with, so I thought I'd ask here.

1. It seems like the interest rates being offered on a conventional mortgage for a duplex vs a single family home are a bit higher.  We are okay with this but we were thinking of paying points to obtain a lower interest rate.
* if this were a single family home these points would all be tax deductible
* since this would be an owner occupied duplex, does that mean half of the value of the points could be deducted now (for the half we occupy), and the other half would have to be deducted over the term of the loan (for the rental portion)?

2. Our income is such that we are subject to AMT and therefore our property taxes will not be tax deductible.  It seems that for the duplex, we should still be able to deduct half of the property taxes against the rental income.  Is this the case?

3. Does anyone have any general advice about land lording?  It seems like a nice way to have a tiny bit of passive income and since we'd also be occupying the house it wouldn't be a terrible inconvenience to do minor repairs, etc by ourselves.

K-ice

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Re: Tax implications of buying a owner occupied duplex
« Reply #1 on: July 31, 2016, 10:18:13 PM »
Sorry you have no replies yet so I'll try to help but I'm Canadian so laws might be different. 

1) Here all mtg rates are the same until you have more than a 4-plex.

2) I don't know what AMT is. But yes here you could deduct 1/2 unless there are major differences between both suites. For example if one side (floor) has a different square footage or major upgrades they may not be valued as equal and then tax deduction would change accordingly.

3) I am happy to be a landlord. Just remember you are on call 24/7.

Drifterrider

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Re: Tax implications of buying a owner occupied duplex
« Reply #2 on: August 01, 2016, 05:47:36 AM »

3) I am happy to be a landlord. Just remember you are on call 24/7.

Only if you act as manager.  I have a PM.  They only call me to authorize expenditures.

sis

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Re: Tax implications of buying a owner occupied duplex
« Reply #3 on: August 02, 2016, 03:14:02 PM »
I figured out the answer to this one... it seems that as long as this house we buy is our primary residence we can deduct all points paid :-)  That makes me pretty happy. 

zephyr911

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Re: Tax implications of buying a owner occupied duplex
« Reply #4 on: August 03, 2016, 11:00:02 AM »
I've been looking at homes in an area where it seems like you can get much more "bang for your buck" buying a duplex instead of a single family home.  We also have not been able to find a desirable single family home in the area that we are searching.  I have a few questions that maybe some of you have dealt with, so I thought I'd ask here.

1. It seems like the interest rates being offered on a conventional mortgage for a duplex vs a single family home are a bit higher.  We are okay with this but we were thinking of paying points to obtain a lower interest rate.
* if this were a single family home these points would all be tax deductible
* since this would be an owner occupied duplex, does that mean half of the value of the points could be deducted now (for the half we occupy), and the other half would have to be deducted over the term of the loan (for the rental portion)?

2. Our income is such that we are subject to AMT and therefore our property taxes will not be tax deductible.  It seems that for the duplex, we should still be able to deduct half of the property taxes against the rental income.  Is this the case?

3. Does anyone have any general advice about land lording?  It seems like a nice way to have a tiny bit of passive income and since we'd also be occupying the house it wouldn't be a terrible inconvenience to do minor repairs, etc by ourselves.
I don't know how far into AMT territory you are, and admittedly don't know much about AMT in general, but costs on the rental portion of your property are deducted above the line via your Schedule E, and I don't think that ever goes away with AMT.
The personal portion, can't help much with that....
Semi-FIREd December 2017, part-time entrepreneur, lover of puppies and saltwater.

sis

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Re: Tax implications of buying a owner occupied duplex
« Reply #5 on: August 03, 2016, 11:33:07 AM »
I've been looking at homes in an area where it seems like you can get much more "bang for your buck" buying a duplex instead of a single family home.  We also have not been able to find a desirable single family home in the area that we are searching.  I have a few questions that maybe some of you have dealt with, so I thought I'd ask here.

1. It seems like the interest rates being offered on a conventional mortgage for a duplex vs a single family home are a bit higher.  We are okay with this but we were thinking of paying points to obtain a lower interest rate.
* if this were a single family home these points would all be tax deductible
* since this would be an owner occupied duplex, does that mean half of the value of the points could be deducted now (for the half we occupy), and the other half would have to be deducted over the term of the loan (for the rental portion)?

2. Our income is such that we are subject to AMT and therefore our property taxes will not be tax deductible.  It seems that for the duplex, we should still be able to deduct half of the property taxes against the rental income.  Is this the case?

3. Does anyone have any general advice about land lording?  It seems like a nice way to have a tiny bit of passive income and since we'd also be occupying the house it wouldn't be a terrible inconvenience to do minor repairs, etc by ourselves.
I don't know how far into AMT territory you are, and admittedly don't know much about AMT in general, but costs on the rental portion of your property are deducted above the line via your Schedule E, and I don't think that ever goes away with AMT.
The personal portion, can't help much with that....

Yep this is part of why we are buying a duplex... so we can at least benefit from part of the property tax deduction through Schedule E.  :-) 

Really though I can't complain about being subject to AMT... there are worse positions to be in.

zephyr911

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Re: Tax implications of buying a owner occupied duplex
« Reply #6 on: August 03, 2016, 12:41:47 PM »
Yep this is part of why we are buying a duplex... so we can at least benefit from part of the property tax deduction through Schedule E.  :-) 
Yep, and half of everything else too (or whatever portion applies, for direct costs that can be assigned to that specific unit).
Quote
Really though I can't complain about being subject to AMT... there are worse positions to be in.
Congratulations? >.<
Semi-FIREd December 2017, part-time entrepreneur, lover of puppies and saltwater.