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I rent out a spare bedroom in my Condo and I had to pay a special assessment in 2017

The special assessment was definitely for repairs since a hailstorm "destroyed" (badly dented) the roof, carports, mailboxes, gutters, etc. and the HOA of course bumped that cost to us.  If this storm hadn't happened, the roof replacement would have obviously been an improvement many years down the road.  I know I'm deducting utilities and other expenses because of my roommates but idk if this counts since it seems the only stuff I find online is about renting out entire properties vs. a spare bedroom.  As a note this place is my primary residence so my roommates only have about 20% of the space to themselves.

1 Reply
MichaelDC
New Member

I rent out a spare bedroom in my Condo and I had to pay a special assessment in 2017

It seems you're on the right track, though I didn't notice a specific question. If you have any other details regarding this question, please feel free to post them in the comment section. 

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 the 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 roommate 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.

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