Rental Property Expense Qualification

[mgawro01]

We own a home which our daughter lives in rent free.  She has a room mate which pays rent.  We report the rent as income and deduct any repair expenses on the house.  My daughter pays for the electricity and internet on for the home.  Can we deduct the cost of electricity and internet as an expense.

[RobertB4444]

Not unless you pay for it.  Your daughter is paying for utilities on her home.  That's not deductible to her or you.

Also, you should be entering rental expenses as a percentage of the rented home.  At this point you said that you are deducting repair expenses.  You should be deducting expenses at the rate of the percentage of the house that is being rented by the roommate.  if she's using 50% of the house then 50% of all your expenses are deductible and so on.  The rest of the house is just a second home where your daughter lives.

[mgawro01]

Thanks for the great response.  I'm assuming that 50% rule applies to the cost of taxes and insurance?  We can only claim half of each as expenses

[DianeW777]

Yes, that is correct. You can utilize 50% of what you pay that is necessary for the rental portion of the house assuming that is a reasonable rate.

Example: If the entire house is utilized by both your daughter and the tenant then 50% would be a reasonable rate. If there is any square feet where the tenant is not allowed to use, then it's the total square used by the tenant divided by the total square feet of the entire house. This will give your the correct percentage to use for expenses paid for the entire house.

@mgawro01