I live full time in my primary residence, and I have a room rented out with full use of other areas of the home -- how should I report Personal Use days?

Forum|Forum|4 years ago
March 27, 2022
3 replies
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My roommate/ tenant has lived in the property with me full time. We share the majority of the home, but he has his own room. Do I count the number of fair rented days as the same as personal use days? Or do I say 0 personal use days because I haven't used his private room at all?

TurboTax Premier Online

AnnetteB6

Personal use days pertain to your use of the rental portion of your home (the private bedroom). If you have not used that space personally since the time you started renting it, then your personal use days would be zero.

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Hal_Al

Employee

Roommate rental

If this is merely a cost sharing arrangement where the amount paid is below fair market rental, there would be no reportable income to you. If the “rent” amount is fair market value, or more, there is still some question as to whether you even have to report it, as it almost always comes out zero. Most people take the attitude that it is not income; it's just room mates sharing expenses and ignore it. Family, as opposed to unrelated roommates, makes that position stronger.

Here’s what you may be required to do:

Report the income (enter at Rents & Royalties/Income & expenses from Rental Properties); and then deduct the expenses on schedule E. If the room mate has full run of the house, and there's just the 2 of you, then half your expenses are deductible (mortgage interest, property taxes, insurance, utilities, repairs, and depreciation [if needed}). Your net income will usually be less than zero.

What you are NOT allowed to do, because it is your own home (you have "personal use") is claim a loss from this activity, to offset other income. Because of the "personal use rule", your deductions are limited to your income. Net effect ZERO.

It is possible for you to gain a positive tax effect from this activity; If enough of your schedule A deductions (mortgage interest & property tax) are shifted to Schedule E, and your standard deduction becomes bigger than your itemized deductions, you will have effectively saved on taxes.

If you have no mortgage, then there could well be profit involved, which you may have to offset with depreciation that could lead to "recapture" in the future when the property is sold.

https://www.irs.gov/publications/p527/ch04.html#en_US_2014_publink1000219159

TurboTax (TT) does not handle this properly. TT will not limit your deductions to your income. You have to do that manually. TT wants you to enter this as a “not for profit rental”, which does not use Schedule E and puts your expenses on Schedule A (itemized deduction). I'm of the opinion that's not the proper way.

LUISPOLIDURA

On the question above, if my house has5 rooms do I enter 20% for the room I am renting, or 50% because it’s just me and the roommate living in the house?

Hal_Al

Employee

Q. On the question above, if my house has5 rooms do I enter 20% for the room I am renting, or 50% because it’s just me and the roommate living in the house?

A. I've seen both answers in this forum. I'm of the opinion, you can use 50%.

Carl11_2

Employee

For depreciation, the percentage of square footage rented is that percentage that is exclusive to the renter. Shared space doesn't figure in to that.

You'll enter the number of personal use days in which you used that specific space that is exclusive to the renter, for your personal use. Typically, you will have ZERO days of personal use of that space that is exclusive to the renter.