New House im renting out

Forum|Forum|2 years ago
March 11, 2024
1 reply
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I'm a first time homebuyer, originally I planned on just living here myself as I can afford everything. But a few of my friends asked if I wanted to rent out a couple of the spare rooms I had since it would help me with the costs and give them a reasonable place to live, I agreed. I am unsure what to do about my taxes though. Do I have to claim it all as income? or can I get deductions since I am technically renting out my house? Any help would be very appreciated.

Best answer by MinhT1

When you rent out part of your home, common expenses have to be apportioned between personal use and business use (rental) of your home.

You need to calculate the percentage of business (rental) use. One common method is to divide the square footage of the rented portion by the total square footage of the house.

In the rental section, you will report the rent received as Rental income and will deduct as rental expenses the rental portion (total costs multiplied by the percentage of business use) of each common cost (such as mortgage interest, property taxes, utilities…). You also claim other costs related to the rental such as repairs and maintenance, etc.

In the personal section, you will claim in Itemized deductions the personal use portion of mortgage interest and property taxes.

Please read this IRS publication, paragraph on Renting Part of Property on page 25.

Also read this TurboTax article about Rental real estate and Taxes.

MinhT1Answer

When you rent out part of your home, common expenses have to be apportioned between personal use and business use (rental) of your home.

You need to calculate the percentage of business (rental) use. One common method is to divide the square footage of the rented portion by the total square footage of the house.

In the personal section, you will claim in Itemized deductions the personal use portion of mortgage interest and property taxes.

Please read this IRS publication, paragraph on Renting Part of Property on page 25.

Also read this TurboTax article about Rental real estate and Taxes.

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