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Published July 15, 2026
Split expenses between your unit and the rental unit, usually by square footage, then report only the rental share on Schedule E.
If you live in one side of a Redondo Beach duplex and rent out the other, you split every shared expense between the two units, most commonly by square footage or by unit count, and you only deduct the rental unit's share on Schedule E. Your own unit's costs are personal and non-deductible. This split-treatment is required under Internal Revenue Code section 280A(c)(3) and detailed in IRS Publication 527.
Most of our Redondo Beach and South Bay owners who bought a duplex or a triplex did it for exactly this reason: live in one unit, rent the other, and let the tenant's rent cover a chunk of the mortgage. The IRS lets you treat the rental unit as a normal rental property for tax purposes, separate from the unit you occupy. Section 280A generally limits deductions on a home used for both personal and rental purposes, but section 280A(c)(3) carves out a specific exception for a dwelling unit used as a residence that is rented, or held out for rent, for use as a residence. When you occupy one self-contained unit and rent out the other separately, the IRS treats them as two distinct pieces of property for allocation purposes rather than applying the mixed personal-use limits that apply to something like a single home with a rented room.
Start with anything that benefits the whole building: property tax, insurance, a new roof, exterior paint, landscaping, pest control, the water bill if it is on one meter. The standard method is to allocate by relative square footage of the two units. If your duplex is a true 50/50 split, half of those shared costs go on Schedule E for the rental unit and half stay with you as a personal, non-deductible expense (with the narrow exception of mortgage interest and property tax, which you can still deduct personally on Schedule A up to the usual limits even though they are not deductible against rental income).
Depreciation follows the same split. Your depreciable basis in the building, not the land, gets divided the same way, so only the rental unit's half is depreciated over 27.5 years under the standard MACRS residential rental schedule. A capital improvement that serves the whole building, like a new roof or a repiped water main, is treated as a new asset and split the same way: the rental half is added to your Schedule E depreciation schedule, and the residence half is added to your personal cost basis in the home for when you eventually sell.
Anything that is unit-specific is easy: a repair inside the tenant's kitchen, new flooring in their unit, an appliance you buy just for their side. Those are 100 percent Schedule E expenses because they never touch your own living space.
The biggest one is using a 50/50 split on a duplex where the units are not actually the same size. If your unit is 900 square feet and the rental unit is 1,100 square feet, the allocation should be roughly 45 percent to your unit and 55 percent to the rental, not an even split. The IRS instructions for Schedule E do not mandate one specific allocation method, but square footage is the most defensible and the one accountants use most often, so keep a copy of your floor plan or appraisal with your tax file in case of an audit.
The second mistake is claiming personal-use days against the rental unit. Because the two units are separate dwellings, the vacation-home personal-use-day rules under section 280A(d) generally do not apply to the rental unit just because you live next door, but they can apply if you ever use the rental unit yourself, for example putting a family member in it rent-free for part of the year.
Keep the two units' expenses separate in your bookkeeping from day one rather than trying to reconstruct an allocation at tax time. A simple square-footage ratio, applied consistently every year, is what your CPA will want to see, and it is what will hold up if the return is ever questioned.
If you would rather not track this split yourself, that is part of what we do for owners who self-manage the other half of their duplex.
This is general information, not legal or tax advice. Confirm with a licensed tax professional before you act.
Last verified: July 2026.
Topics: taxes, schedule e, duplex, owner occupied, redondo beach, depreciation
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Schofield Properties is a family run property management company at 323 Richmond St, El Segundo, CA 90245. We have managed the South Bay since 1972 and personally oversee about 186 doors today. Book a call to talk about your property.
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