4 Unit Apartment

Today TaxMama hears from Tom in the TaxQuips Forum who wants to know.  “Does anyone know if there are any tax breaks if the owner lives in one of the units of a 4-unit apartment building? The owner moved into the unit after 5 years of owning the building.”

Hi Tom,

 Well, if you are asking about homebuyer credits? No, those don’t apply.

 If you’re thinking that because this is a multi-unit building, you can treat 100% of it as business, because the manager has to live there? Nope. Four units do not need a live-in manager.

 If you’re thinking that since you’re moving in, the whole building can get the benefits of a personal residence? Not all. Only the one unit where the owner lives can get the personal residence exclusion when you sell the building.

 Actually, you lose certain benefits once the owner moves in.

  • You cut depreciation costs by 25% (or whatever percentage of the building that unit represents).
  • You cut utilities, insurance, repair and maintenance costs by the same percentage.
  • You cut property tax and mortgage interest expenses by that amount.
    • but you get to move them to Schedule A as itemized deductions.

I don’t know what you had in mind. But I hope this helps.

And remember, you can find answers to all kinds of questions about real estate and other tax issues, free. Where? Where else? At www.TaxMama.com.

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