Need clarification on partial rental properties with regard to portion of house that is rented as well as whether to report it.

[LLsz]

My monthly mortgage is over $1800 a month. I live in a 2 bedroom town house and have rented one bedroom to my friend for $800 a month.

Question Part I: Since this is all going towards mortgage, I'm making no profit off of it. Do I still have to report this rental as income?

Question Part II: If I do have to report it, would I say that 50% of the house is rented, since its 2 of us? I read on the IRS website, they gave the example that if you rent a 100 sq ft room in a 1000 sq ft house then you are only renting 10% of the house. To me this sounds like they are referring to a unit, where the tenant is confined to the room and potentially have their own entrance/exit to the house. In my situation, my friend and I share the entire house together, only we each have our separate bedrooms. 

[ColeenD3]

1) Yes, you still report your income, even if it is less than your expenses.

2) Common areas are not part of the rental area. They are considered to be personal.

[Carl]

Question Part I: Since this is all going towards mortgage, I'm making no profit off of it. Do I still have to report this rental as income?

Be aware that while it all may be going towards the mortgage, the principle part of your mortgage is not deductible anywhere on your tax return. Only the interest is deductible. Additionally, the percentage of interest equal to your percentage of space rented is all that is deductible on the SCH E. Ditto for property taxes and insurance.

Question Part II: If I do have to report it, would I say that 50% of the house is rented, since its 2 of us?

No. Your rental percentage that that percentage of square footage that is "exclusive to the renter". Common use areas are not exclusive to the renter. So if the bedroom the renter uses is 100 SQ FT of a 1000 SQ FT house, that's 10%. 

If the house has 2 baths and one of those baths is only accessible from the renter's bedroom, then you can include the sq ft of the bath also. Whereas if that bath is "across the hall" from the bedroom, it's not exclusive to the renter.

Also, when you are done double-check the amount of depreciation taken. Dollars to donuts the amount figured by the program will be wrong. To figure the correct depreciation, see IRS Publication 946 at https://www.irs.gov/pub/irs-pdf/p946.pdf and use the worksheet on page 37. For line 6 of that worksheet, table A-6 on page 72 is used.