If you are renting a room in your home, you will need to prorate your rental expense by the portion of the home that is being rented against the total home. The rental portion of real estate taxes can be deducted as a rental expense, and the remainder as an itemized deduction.
You must divide certain expenses between the part of the property used for rental purposes and the part of the property used for personal purposes, as though you actually had two separate pieces of property. You will enter the calculated rental portion into the rental section of TurboTax.
You cannot deduct any part of the cost of the first phone line even if your tenant has unlimited use of it. If you install a second phone line strictly for your tenant's use, all of the cost of the second line is deductible as a rental expense. You do not have to divide the expenses that belong only to the rental part of your property. For example, if you paint a room that you rent, or if you pay premiums for liability insurance in connection with renting a room in your home, your entire cost is a rental expense.
You can use any reasonable method for dividing the expense. The most common methods for dividing an expense are based on the number of rooms in your home or based on the square footage of your home.
For example, I would go about it like this. Assuming I have a 4 bedroom 2 bath home that also has a kitchen and living room, we would have 8 rooms to consider and the number 8 would be used as the denominator in my division problem. The tenant would have one room and one bath that is exclusively used by them. Since the kitchen and living room is shared, you could take 50% for both rooms making 3 total rooms used by the tenant. The number 3 is the numerator. The rental percentage becomes 37.5% or ? of the home. You would take this percentage and multiply it against all of the home’s expenses, except expenses that apply to the tenants bedroom and bathroom. Any expenses for the tenants exclusive rooms are fully deductible as rental expenses.
To complete the example, you would need to apply the fraction of ? (8 rooms - 3 tenant rooms = 5 personal rooms) or 62.5% to the deductible expenses for your part of the home. The deductible expenses for the personal part of the home includes mortgage interest, mortgage insurance, and real estate taxes.