Military Member Confusion: Standard deduction or itemized deduction? Need tax advice for rental property

Title: Military Member Confusion: Standard deduction or itemized deduction? Need tax advice for rental property 1 Hey everyone, I'm currently serving active duty in the Navy based in North Carolina. About 4 months ago, I purchased my first property - a duplex in NC where I'm living in half and renting out the other side. My legal state residency is Montana, which means I don't pay state income taxes there (definitely a nice military perk!). I just turned 24 and this is my first time dealing with property ownership while in the military. I'm trying to gather as much info as I can before tax season - should I go with the standard deduction or would itemizing make more sense in my situation? If I do choose to itemize my deduction, I'm confused about the sales tax part - do I need to add up only the sales taxes shown on receipts or the entire amount spent? Any advice from people who've been in similar situations would be super helpful!

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19 comments

Ana Rusula

•8M

8 Hey there! As a former military member who also owned rental property, I can definitely help with this. The answer depends on which option gives you the bigger deduction. For 2025, the standard deduction is $14,600 for single filers and $29,200 for married filing jointly. Itemizing only makes sense if your total itemized deductions (mortgage interest, property taxes, charitable donations, etc.) exceed your standard deduction amount. With a duplex where you live in one half and rent the other, it gets a bit more complicated. The expenses for the rental portion are actually reported on Schedule E as rental expenses, not as itemized deductions. These include a portion of mortgage interest, property taxes, insurance, repairs, and depreciation for the rental side. For the side you live in, those expenses (your portion of mortgage interest and property taxes) could be itemized deductions. As for your sales tax question - if you choose to deduct sales tax instead of state income tax (which makes sense since Montana doesn't have state income tax), you can either use the IRS sales tax tables based on income or keep receipts and deduct actual sales tax paid, whichever is higher.

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Ana Rusula

•8M

8 You're welcome! Yes, since it's a duplex split evenly, a 50/50 allocation for shared expenses like property taxes, mortgage interest, and insurance is typically reasonable. You'd deduct the rental half on Schedule E, and potentially itemize your personal half. As for sales tax, honestly, for most people the IRS tables are sufficient and much easier. Unless you made major purchases like a vehicle or expensive renovation materials, the tables usually give you a good amount. You can add sales tax from major purchases on top of the table amount, so keep those big receipts.

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Ana Rusula

•8M

12 After dealing with a similar situation (military with rental property), I found that using taxr.ai really simplified things for me. I was super confused about which deductions to take and how to properly allocate expenses between my living space and rental property. I uploaded my documents to https://taxr.ai and it analyzed my situation, pointing out that I was missing several key military-specific deductions. It flagged that I could deduct unreimbursed moving expenses (which civilians can't do anymore) and helped me correctly allocate my duplex expenses. The real game-changer was when it explained how my BAH (Basic Allowance for Housing) affected my rental income reporting. It turns out I was about to overpay by quite a bit! Anyone else in military with property should definitely check it out.

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Ana Rusula

•8M

12 Yes, it absolutely handles state taxes too! It's particularly helpful with military situations where you have multiple states involved. It will analyze which deductions you're eligible for in each state based on your residency status. It's fundamentally different from TurboTax or H&R Block because it's not just a form-filler. It actually analyzes your documents and financial situation to identify deductions and credits you might miss. In my case, it found several military-specific deductions that TurboTax didn't even ask me about. It's more like having a tax professional review your situation rather than just a tool to input numbers.

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Ana Rusula

•8M

15 Just wanted to update on my experience with taxr.ai after asking about it earlier. I decided to try it for my military/rental property situation and I'm genuinely impressed. I've been using TurboTax for years and always felt like I was missing something. The document analysis caught that I was incorrectly categorizing some of my duplex expenses and potentially missing out on depreciation. It also clarified how to handle my Montana legal residence while being stationed in different states. The interface walked me through allocating expenses between personal and rental use in a way that made way more sense than what I was doing before. Ended up with about $2,200 more in deductions than I would have found on my own. For military members with property, it's definitely worth checking out.

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Ana Rusula

•8M

5 If you're trying to get clarification from the IRS directly on your military tax situation, good luck getting through on the phone! I spent WEEKS trying to reach someone about my rental property depreciation questions. Finally used https://claimyr.com and got through to an IRS agent in under 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent was able to explain exactly how to handle the split between personal use and rental property for my situation. They confirmed I could take the standard deduction AND still deduct rental expenses on Schedule E. Saved me tons of stress and potentially an audit later.

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Ana Rusula

•8M

5 It's not magic - they use a combination of technology that monitors IRS phone lines and calls at optimal times. When they secure a spot in the queue, they call you and connect you directly with the IRS agent. It's basically like having someone wait on hold for you. They don't put you "in front" of the queue - they just handle the waiting part so you don't have to spend hours with your phone on speaker. I was skeptical too until I tried it. The IRS agent I spoke with was actually super helpful once I finally got through - answered all my questions about how to divide expenses and confirmed my understanding of Schedule E vs itemized deductions.

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Ana Rusula

•8M

17 I have to eat my words about both services I was skeptical about earlier. After waiting on hold with the IRS for FIVE HOURS across three days and getting disconnected each time, I broke down and tried Claimyr. Not only did I get through to an IRS agent in about 20 minutes, but they actually resolved my question about military state residency and rental property allocations. The agent confirmed that I needed to file two separate forms - Schedule E for the rental portion and potentially Schedule A if I itemize for my personal half. The service cost less than what I was losing in productive hours sitting on hold. For military members with complicated tax situations like rental properties, it's genuinely worth it just for the peace of mind getting official answers.

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Ana Rusula

•8M

10 I was in almost the exact same situation a few years ago! Based on my experience, here's what you should consider: With a duplex split 50/50, you'll likely do better with the standard deduction for your personal half unless you have significant other itemizable expenses (like major medical expenses or large charitable donations). The rental side is reported separately on Schedule E where you can deduct expenses regardless of whether you take standard or itemized deduction. Don't forget about depreciation on the rental portion! That's a big deduction many new landlords miss. And definitely take advantage of your Montana residency - that's a smart military tax move.

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Ana Rusula

•8M

10 Depreciation is actually pretty straightforward for residential rental property. The IRS lets you depreciate the building portion (not the land) over 27.5 years. You'll need to determine what portion of your purchase price was for the building vs. land - your property tax assessment often breaks this down, or you can use a reasonable estimate like 80% building/20% land in most areas. As for military-specific deductions, you can deduct unreimbursed moving expenses (still available for military even though civilians lost this deduction), and you may be able to exclude combat pay if applicable. If you paid state taxes in non-resident states where you were temporarily stationed, you might get credits for those in certain situations. I'd recommend talking to a military-experienced tax professional your first year with this setup.

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