I rent out a room in the house that I own, as well as live in this house. What deductions am I eligible for?

Forum|Forum|6 years ago
June 6, 2019
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TurboTax Self Employed Online

Coleen3

Employee

You can deduct, for that room of the house, items necessary to produce income. Mortgage interest, property taxes and PMI are normally deducted on Schedule A anyway, so these will be prorated on both Schedules A and E. Expenses that exclusive rental expenses still have to be prorated, you just can't take the personal portion on Schedule A.

When you're answer the question regarding how many days is a room in your house rented, answer the number of days rented (258) and how many days you used that room personally the rest of the year (107). You can't rent it and use it personally at the same time. If it was rented all year, put 365.

Screens to take notice of in the program:

"Do any of These Situations apply to This Property"

Select "I rent out part of my home".

When you marked the box for TurboTax to allocate per the percentage of the business portion of a mixed-use property the expenses are only entered one time in the rental section and TurboTax will allocate correctly to personal Schedule A and business to Schedule E according to the percent you entered.

Yes, to let TurboTax calculate the expenses for you.

On screen "enter use percentage" this where the % goes for TurboTax to do the calculation.

Enter rental use percentage.

TurboTax will flow personal to Schedule A and rental to Schedule E.

Only the exclusive used are is considered rental area. Common area is available to all and is not a factor in allocation of expenses.

How to divide expenses. If an expense is for both rental use and personal use, such as mortgage interest or heat for the entire house, you must divide the expense between rental use and personal use. You can use any reasonable method for dividing the expense. It may be reasonable to divide the cost of some items (for example, water) based on the number of people using them. The two most common methods for dividing an expense are (1) the number of rooms in your home, and (2) the square footage of your home.

See the link below for greater detail.

http://www.irs.gov/publications/p527/ch04.html#en_US_2015_publink1000219159

bellef22Author

Thanks for the help! Follow up questions: I've done some improvements, such as painting, new cabinets, installed lighting, new furniture, in the common areas of the house. Can I deduct a portion of all that as well?

jimb108

I am in this exact same circumstance. Can someone please reply

VT Homestead

"On screen "enter use percentage" this where the % goes for TurboTax to do the calculation." <- No one ever replied but this auto calculation feature no longer exists. I can't find a place to enter use percentage anywhere. I need to show that i am not only renting the room "part of the year", but also that I am renting part of the house. I cannot find ANYWHERE where I can enter percentage. Even though turbo tax says I need to calculate "my own percentage" of mortage, etc, it only asks for those values directly from 1098 form. I used to be able to just enter percentage of the house and turbo tax automatically allocated mortgage interest, etc between schedule A and schedule E. Can someone please reply. Do we now have to calculate this percentage on our own now?

hr15

It looks to me like the software interface is glitchy. I have the same scenario as the rest of these people (renting out some rooms, needing to take only the fraction of the deduction). When you are on the page called "Review Your Rental Property Info" and you go in to edit the "Situations" section and check off rented "Part of Home" there were times that it asked "Do you want to calculate [this] yourself" and if you selected for turbo tax to do the calculation it would then prompt to enter the percentage of the home rented. But the majority of the time it would NOT give that page. The only way I could get it back was by deleting the rental and starting over and selecting ONLY "Part of the Home". I just bit the bullet and will enter the correct deduction amounts myself.

Bottom line is that this is an ongoing issue. Seems to be a software issue and is going to be problematic for lots of folks who just trust the software to be correct and didn't learn the tax rules themselves and do the calculations on their own. They are going to get larger refunds than they should have and if audited will be an issue.

Spoke to customer support today and was told that in order to "get my answer" to navigating the software I would need to upgrade to live (+$100) despite the issue being a software issue and not a tax question issue.

Turbotax, can you address this?

DianeW777

Partial rentals can become intricate and detailed. It's difficult to narrow it down when there are different rooms with different sizes and for periods that are not definite or distinct. It goes further if there is personal use of the same space at different periods of the year.

If you did not use this rental space for personal purposes you should not be selecting 'Vacation or short term (used for personal purposes and rented for short term period)'. In these situations it's best for you to enter the income and the expenses at the percentage applicable for each period.

As for depreciation for the portion of the cost of the home that represents the rental portion, likewise you should separate out the cost of each room and depreciate part of the house under each rental or one rental incorporating all rental activity. The best way to arrive at a cost of the home is to divide the square fee of use by the total square feet of the home. Do not include the land portion of the cost. You can use the city or county tax assessments to determine the land vs building percentages.

This assumes again, that there is no personal use of those same rooms. If so, then the proration must be further reduced by the time of personal use vs rental use.

Please clarify and update if we can be of further assistance in specifics.

@hr15

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