I rent out the second bedroom in my primary residence. Should I list this as rental income, and should the interest/taxes for it go in rental expenses or the deductions?

[yvivian11]

I think this would be double the deductions. I know it asked me about "rental use percentage" and I put down 50% since I rented out 1 out of the two rooms. However, I looked at the final filing and it doesn't seem to halve the expenses for it. Am I doing this correctly?

[ColeenD3]

You need to divide your mortgage interest and property taxes between the two forms. One way is to use your square footage to determine percentages. You can do it manually.

[Hal_Al]

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 room mates 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); and then deduct the expenses 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.

[Carl]

In support of @Hal_Al 's response, it also depends on your intent. If your reason for renting out the room is with the "intent" to make money, then it doesn't matter if you make a profit or not. It's reportable income on SCH E. In a situation where your state offers a "renter's credit", if the renter wants that credit for the money they pay you, then it's rental income. You don't have much of a choice in that scenario and must register as a landlord with your state, report the income, and provide your tenant with any paperwork they require in order for them to claim the credit.

I am familiar with this process in the state of Hawaii. That state does not "legally" allow a "cost sharing arrangement" if one of the persons sharing expenses is the owner of the property or has any level of ownership interest, direct or indirect in the property.