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mikeva67
New Member

If i rent out half my garage and declare the rent as income, what expenses and deductions would i be allowed to take?

 
5 Replies

If i rent out half my garage and declare the rent as income, what expenses and deductions would i be allowed to take?

Is this a garage at a personal residence ?   Or do you use this garage for a business you run and you want to rent half to some one else.  And if it is a business what kind?  Sch C ?  Corp? 

mikeva67
New Member

If i rent out half my garage and declare the rent as income, what expenses and deductions would i be allowed to take?

it is on my property but detached from home. I would be using half of it for my own storage and renting the other half to an rv owner. If I were to set up a business the purpose of which is to rent to rv owners to store their vechicles, how would that work? Could I deduct or expense the percentage of the size of half the garage per my mortgage? This is a commercial sized building and has external access. Could I expense my mortgage %, taxes, insurance etc?  Thank you for resonding!

If i rent out half my garage and declare the rent as income, what expenses and deductions would i be allowed to take?

Ok ...  so you have a pure rental to report on the Sch E  and expense  a portion of  the entire property.  There is absolutely no reason to set up a business  for this situation unless you enjoy paying more taxes.

 

Read up on the rules here: 

https://www.irs.gov/forms-pubs/about-publication-527

If i rent out half my garage and declare the rent as income, what expenses and deductions would i be allowed to take?

split the costs and expenses 50/50 since that seems to be business use vs rental use.

business income expenses go on schedule C rental income and expenses go on schedule E.  your issues are as follows:

determining its tax basis for depreciation purposes - it must be depreciated for both schedule C and rental purposes

if you have a mortgage on the property the mortgage interest must be allocated among the residence and the garage and then the portion allocated to the garage split 50/50. the same would apply to. the same with taxes

 

other expenses such as utilities would need to be allocated in some logical manner.

 

as a suggestion, since you should know your cost basis for the whole property you could subtract out your best estimate of what the land cost was.  the remaining cost would be for the residence and the garage and you could use square footage to allocate this remaining cost.    remember the garage is now business property so the cost of the garage would need to be depreciated over 39 years.  your other option is to get an appraisal.    

Hal_Al
Level 15

If i rent out half my garage and declare the rent as income, what expenses and deductions would i be allowed to take?

Report the income and then deduct the expenses on schedule E.

 

What you are NOT allowed to do, because 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 is usually ZERO.

 

TurboTax (TT) does not handle this properly. TT will not limit your deductions to your income. You have to do that manually. TT wants you to enter this as a “not for profit rental”, which does not use Schedule E and puts your expenses on Schedule A (itemized deduction). I'm of the opinion that's not the proper way.

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