How do I complete Schedule E for the room I rented out in my home?

[maahtin]

How should the 'Type of Property' in Schedule E box 1b and the 'Fair Rental Days' and 'Personal Use Days' be entered on Schedule E box 2, for the room I rented out in my house for part of the year?

[PaulaM · Accepted solution]

Indicate under the Property Profile section the type of rental (single family home). This will flow to box 1b on the schedule E. Continue to enter that you rented a part of your home. Then continue to enter the number of rental days used and personal use days, which flow to box 2 on the form.

Note: Personal Use days refers to days that you used the rental. Think of it as a separate unit. Enter 0 if you never used the room while it was rented. 

[taxquestioner]

Hello,

I've read that if you are renting just a room, the personal use days are 365 minus the days rented. The room by itself is not a dwelling unit. Am I missing something? Thanks!

[AmeliesUncle]

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@taxquestioner wrote:

Hello,

I've read that if you are renting just a room, the personal use days are 365 minus the days rented. The room by itself is not a dwelling unit. Am I missing something? Thanks!

---

Entering the personal and rental days is to prorate expenses.  That proration based on days is done the same regardless if it is the entire "dwelling unit" or just part of it.

In connection with the proration of expenses, the Tax Code specifically uses the phrase "unit (or portion thereof)".

[AlexanderS08]

You are correct that, generally, personal use days are calculated by subtracting the rental days from 365; however, please be aware that sometimes a rental property may be listed for rent or being prepared for rental and those days would not be considered personal use days. @taxquestioner

[Carl]

Days of personal use will practically always be zero. The days of personal use is the number of days you used to property or space for personal use *AFTER* you converted it to a rental.

So if you rented out 1 room in your house and you converted that one room to a rental on Aug 1 of the tax year and you "NEVER" used that room for your personal use after that date, your days of personal use is ZERO. Doesn't matter if the room sat empty and you didn't actually get a renter in there for three months after the date of conversion. So long as you did not use the room for personal use for one single day after the date of conversion, the days of personal use is ZERO.

Additionally, if you converted the room to a rental on Aug 1, that means it was classified as a rental from Aug 1 through Dec 31 which is 151 days. That means it is physically impossible for you to have more than 150 days of personal use. (If you claim the entire 151 days of personal use, then you can't classify it as a rental.)

[Gadz00ks]

I don't understand your instruction to "continue" to add that I've rented a room.

Is this because I just signed up on Intuit and have so far only looked at the paper Schedule E form? Or did I miss something?

Thanks in advance!

[Gadz00ks]

{continued/clarified] where to put that I've rented part of my house...

[JotikaT2]

Go to the Federal section in TurboTax.

1. Select "Income & expenses"
2. Select "Rental Properties & Royalties (Sch. E.)
3. Answer the questions relating to your property until you see the screen which says "Do Any of These Situations Apply to This Property".
4. Under the Rental section, check the box where it says "I rent out part of my home".

Click continue to answer the remaining questions regarding the room you rented out.  

[isamom1982]

@PaulaM  - I, also, rent out a room in my home (my main residence) for part of the year (for the rest it stays empty). I saw your post on how to start to enter that through the "Do Any of These situations Apply to this Property" screen.  I have three related questions, though:

1) Does Turbo Tax (2021 Home and Business Desktop edition) tell me later in the step-by-step if I can/should apportion a DEPRECIATION for my residence to this room in Schedule E line 18?

2) Does TT help me calculate the depreciable basis amount, create a Form 4562 and track the depreciation year on year?  (I assume the pro-ration of the depreciation happens based on the % of total square footage of the residence).

3) Most importantly: Does TT SEPARATE the handling of the "room  in residence" column in Schedule E to account for its "Non-Passive" character? -- I understand that rental of a room in your own residence falls under a "special provision" that makes income "non-passive" and disallows losses (they need to be carried forward) - IRC section 280A.  Thus incomes or losses from this column of Schedule E should not be totaled with other as happens with 'normal rental income / losses that ARE passive. 

[DaveF1006]

Yes Turbo Tax will do these things automatically. First and foremost, be sure to indicate you rent out part of your home as JotikaT2 mentions in her previous post.

1. After entering the information, you will reach a screen that says let us calculate your expense deductions for you.  Here you can decide to enter the expenses from your own calculations or let Turbo Tax do it. Here you must make a choice and it is recommended you let Turbo Tax do the work.
2. Next screen will ask you you what percentage of the house is the room that is rented out. The best way to determine this is to take the square footage of the room and divide it by the square footage of the house.
3. After this, all expenses  will be calculated according to the percentage included above. 
4. To claim the correct amount of depreciation, go to assets and depreciation in your summary page. Enter the information about the cost basis and most importantly, the date you put your rental room in service.
5. What is important now is this when the program asks if you used this asset 100% for business, say no. Then it will ask you for a percentage, put in the percentage that you calculated in step 2. if you don't, the program will depreciate the entire house and this is not correct.
6. A 4562 form will be generated if this is the first year the room has been rented.  This intuit source lists the conditions when the form is required. 
7. In determining if these are treated as non-passive losses, I referenced this link regarding  IRC section 280A. It mentions that Subsection (a) shall not apply to any item to the extent such item is allocable to a portion of the dwelling unit which is exclusively used on a regular basis. In this example, if the room is used exclusively as a rental room, then the deduction is allowed as a passive loss. Please review this under exceptions listed in the link.
8. Hope this helps.

@isamom1982

[903066945]

@DaveF1006 

Hey very similar question. I lived in my home and rented out one room from Jan to Jun. Then I moved out and rented out the entire house from july to december. 

I split them into two seperate schedule E's. The first part I selected first year renting, lived in the house and entered all the other information. For the second one I selected first year renting this home and converted home to a rental.

Something tells me there might be an issue with how the depreciation is being calculated in these scenarios.

[DaveF1006]

 There is a revision to my answer.  Please read my post that I posted recently.

{Edited 03/02/23} 5:36 PM PST} @903066945

[903066945]

@DaveF1006 

So here is what is happening. I think TT might be making a mistake.

On my rentals and royalties summary

For the depreciation when I lived there, since i started renting from Jan 01 it is calculating full depreciation without considering the number of days I rented part of the house or what percentage of the house I rented (~7k)

For the Depreciation for when I rented to a tenant, since is started renting jun 01 it is calculating based on the fraction of time I rented so ~54%.  The depreciation is ~4k. 

I am not sure how to handle this within TT

[DaveF1006]

Ok, let me provide you with some steps that may clarify your situation. We will report this on one Schedule E instead of two to avoid any confusion between yourself and the IRS.

1.  When you begin entering your profile there is a page that asks, do any of these situations apply to this property? Here you will mark you rent out part of your home and that you converted this from a personal use to a rental in 2022.
2. There should be a screen that says Converting your home as a rental. Here you will need to prorate your expenses during the time you lived in the home and when you didn't live in it. 
3. Next it will ask if you rented this all year, here you can say yes.
4. Next if Turbo Tax asks you how to calculate the expense deductions, here you may wish to indicate you will do the math and enter your own numbers 
5. Go ahead and work through until you get to the rental summary page.
6. Now judging from your question and the tone of your writing, you sound like you might be pretty savvy. You can probably determine on your own how to prorate and report the expenses between the time you lived there and the time you didn't.. The depreciation may take a little work.

•  Here is how the depreciation is calculated.  Since you rented out the house six full months from July -Dec, this is 50% of the year. For the first six months, you used it partially for business and partially personal when you lived in the house. For the first six months, you are dividing the remaining 50% by half which is 25%. So if you add 50% + 25% =75%
• Now when you go to the asset and depreciation in the rental summary page, you will enter cost basis and date purchased. 
• The question will be asked if you used this 100% for business. Here you will check that you used it partially for business and partially for business. Then it will ask the date you started using it for business, you will say 01/01/2022. percentage of time is 75% .for business use. 
• Now the depreciation should be correct as listed in the details.

Now you gave me two conflicting scenarios. You mentioned in first post that you rented the room from January to June and then moved out and rented it out solely from July to the end of December.  Then you mention you started renting in June in your second post. It is really critical to get exact dates as this affects the business use percentage that i mentioned above. 

Let me know me know the exact date you moved out? Was it June or july?  Let me know by replying back to this post and tag me in the post.  The main thing is after looking at this, you just need to report on one Schedule E. 

Looking forward in hearing from you. 

@903066945