Arwen owns a duplex with two equally sized units. She files single and will itemize her deductions. Arwen resides in one unit and rents the other. In 2022, she paid $2,850 in real estate taxes for the whole building. In addition, she paid $7,450 in state and local income taxes during the year, and $1,420 in personal property taxes. To achieve the most favorable tax outcome, how should Arwen's real estate taxes be reported on her return?

Arwen deducts $1,425 on Schedule C, and $1,425 on Schedule A.

Arwen deducts $1,425 on Schedule E, and $1,425 on Schedule A.

The total amount paid, $2,850, is fully deductible on Schedule A.

The total amount paid, $2,850, is fully deductible on Schedule E.