Residential rental activities are reported under Rental Properties in Wages & Income and appear on Schedule E as part of your tax return.
To enter information for rentals, please follow the steps below.
- Federal Taxes tab (Business tab in Home & Business)
- Select Wages & Income
- Scroll down to Rental Properties and Royalties
- Select Start next to Rental Properties and Royalties (Schedule E)
On the page in that section that is titled, "Do any of these situations apply to this property?" be sure that you have checked the box beside I rent out part of my home.
Then, as you go through the next few screens, you will have the opportunity to state what percentage of the home was rented. This percentage is based on square feet or another method you choose. It will be used to prorate your expenses.
If you rent part of your property, 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. If you rent out part of your home for part of the year as you did, you have to manually calculate expenses and mortgage interest yourself and place the amounts in Schedule E for the rental and Schedule A for itemized deductions.
You do not have to divide the expenses that belong only to the rental part of your property.
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.
Only the exclusively used areas are considered rental areas. The common area is available to all and is not a factor in the allocation of expenses.
How to divide expenses. If an expense is for both rental use and personal use, such as mortgage interest or heat for the entire house, you must divide the expense between rental use and personal use. You can use any reasonable method for dividing the expense. It may be reasonable to divide the cost of some items (for example, water) based on the number of people using them. The two most common methods for dividing an expense are (1) the number of rooms in your home, and (2) the square footage of your home.
See the link below for greater detail: IRS Publication 527.
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