In
the case of a rental property that was shared with another tenant, you must
report all of the rent paid by your tenant. However, the expenses that
you deduct are limited. 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.
