Rent at Fair Rental Price

Forum|Forum|1 year ago
April 7, 2025
1 reply
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I have a investment home and I rented it out by rooms. During 2024, I decided to switch to renting out the entire house instead of renting by rooms, for some reason. Most tenants moved out within a two months period but the last tenant refused to move out before his lease ended. He stayed in the house for three more months. For that three months the rental income was just several hundred dollars per month, but the fair rental price in that area is around $2,500. How do I answer the question:" did the property always rent at fair rental price?" and can I deduct depreciation and expenses for the three months as usual? Thank you!

TurboTax Home & Biz Windows

ThomasM125

I don't see an issue as far as fair rent is concerned, since the tenant was only renting one room, so the rent for that room was probably fair. As far as deducting depreciation and expenses for the whole year, you should just consider the house rented for the number of months it was fully occupied. So you will only deduct depreciation and expenses for a portion of the year.

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Tina20222Author

Hi Thomas,

Thank you for replying. As to the depreciation and expense, I am wondering if I can deduct a percentage of that. It is a three bed room house. Let's say the depreciation and expense is $1,000 per month. Can I deduct 30% of the $1,000 for the months that he occupied the room? Thank you.

DianeW777

Yes, you can use the square feet of the rooms against the whole house to arrive at the correct percentage of depreciation. This can get complicated for tax software so my suggestion is to enter the information yourself and keep track of any depreciation you use on your tax return. See the chart below used for 27.5 year depreciation.

Once the whole house is converted to rental you will enter it as an asset with a date placed in service. TurboTax will handle the math for depreciation on this asset. Be sure to separate the land cost and enter it when asked. You can use the tax assessment to arrive at the percentage of cost that applies to the land.