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

[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

[hr15]

@DianeW777 

Hi Diane,

I have a good grasp on how to calculate the appropriate percentage of deductions and depreciation I need, but have issue with having the correct numbers carry forwards on TurboTax. As far as I can see the software needs adjustment.

You can do either the room method or square foot method when determining what percentage of things to deduct and the room method is more straightforward and favorable for me. So I've rented 3 of 8 rooms (37.5%) for 184 of 365 days. The problem that I've had and that I've seen other folks comment on in this and other threads is that there simply isn't a place to enter the 37.5%. Or, referring to the details in my last post, maybe there is but sometimes it shows up and other times it doesn't. The other issue is that when TurboTax calculates deductions for things like utilities those are calculated based on #of tenants it's split between and not the square feet, but the software can't differentiate it and doesn't ask, so it gives you a smaller deduction than correct (in my case). Same thing for repairs when you converted to rental midyear and TurboTax still is multiplying your repair costs by 184/365.

I've seen advice from TurboTax reps on other threads saying that you can select to just do the calculations yourself, which is fine, but if you're only renting for part of the year (184/365) and enter that as such in TurboTax, then it's hard to tell what calculation TurboTax is doing behind the scenes and what you still need to calculate on your own.  (E.g. do I need to enter Y x 37.5% x 184/365 or just Y x 37.5%?).

Tbh, it would have been easier for me to fill out schedule E on my own rather than using the interface since I had to double check all the numbers myself anyways. 

[DianeW777]

You are correct with the exception of the depreciable basis if you own the home.  In that location you can enter the percentage of use.

For the rest of the expenses you should select a single home and then enter the expenses at the percentage you have indicated above and calculated by hand.  You can keep an excel sheet or other tracking sheet if you choose to have the figures right there for you.  This will appropriately reflect the correct expense costs and the correct depreciation.

The details can be so different based on each individual case that the easiest way is to have your figures ready in a case such as yours so there is no question all the expenses are being utilized as you expect.

@hr15

[temporarytaxperson]

I also had this issue. I decided to bite the bullet and do the calculation myself for the one room I rent out, and entered 13% for all my expenses. Then after I had moved on, I clicked 'Federal Review,' and TurboTax found an 'issue' that it wanted me to look at. It wanted me to enter the percentage of the rental use! Now I'm back at the beginning, re-entering all my expenses, and it seems to be running the calculation correctly, calculating 13% of everything I enter as deductible. It even went through my improvements/assets and applied it to everything there too. Now that I'm reviewing that, it reminds me that 'Since I'm only renting out a portion of my property,' I should enter the full asset amount.

Only one remaining issue - I want to deduct the partial cost of all-house repairs, but the full cost of a repair I made for the tenant's space. I entered the full cost repair under 'Miscellaneous.'

[hr15]

That's a good workaround. I didn't end up getting the right prompt to pop up, so had to enter all the figures myself as you did the first time.

It's a common enough situation and probably going to be more common as the economy is tighter. Hoping that someone from the TurboTax community elevates the issue so that it gets addressed in the programming!

[awood206]

I just went through this problem myself and believe I have identified the issue.  

The rules appear to be as follows:

If you rent out part of your home for the entire year, when adding your home, the % allocation question appears and Turbo Tax will automatically calculate the values.

If you rent out part of your home for part of the year, the % allocation question never appears and you have to manually calculate expenses & Mortgage Interest on your own and enter the values yourself.  This includes manually adjusting Mortgage Interest and property taxes for your personal deduction.  

[rochelle-leheux]

Thank you for the detailed work around description. I have felt gratified to see many other people were having the same issue with the software that I was having. Hopefully the good people at Intuit figure out a way to streamline this so we are not relying on the community here for something that is critical to taxes!!