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srserie
New Member

I live in my personal residence and rent out a couple rooms. Is categorized as a Rental Property now?

 
3 Replies
Hal_Al
Level 15

I live in my personal residence and rent out a couple rooms. Is categorized as a Rental Property now?

No. It's still your personal residence.

Rephrasing your question, you want to know if you have rental income to report. Probably not. 

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 roommates 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); then deduct the expenses. TurboTax will do this 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.

srserie
New Member

I live in my personal residence and rent out a couple rooms. Is categorized as a Rental Property now?

Thanks!  So, if I do not claim the rent as income can I deduct the two rooms as part of my business?
Hal_Al
Level 15

I live in my personal residence and rent out a couple rooms. Is categorized as a Rental Property now?

What business? Renting rooms is not a "business". Rental activity is a separate income category from business. As noted above, you can only "deduct the two rooms" up to the amount of income you take in. if you report no income, you get no deductions. So, no there is no net deduction from renting rooms.
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