Partial home rental reporting

[rickperryz]

In 2019 we spent $90K finishing our basement and began renting it. I don't see a way in TurboTax to divide the expenses between our home on the main floor vs the basement rental. It seems only to assume the entire property was rented. How do I report a partial home rental?

[MinhT1 · Accepted solution]

The money you spent finishing your basement before renting it is considered as an improvement. It cannot be deducted as a rental but must be added to the cost basis of your property.

When you rent out part of your home, common expenses have to be apportioned between personal use and business use (rental) of your home.

You need to calculate the percentage of business (rental) use. One common method is to divide the square footage of the rented portion by the total square footage of the house.

In the rental section, you will deduct as rental expenses the rental portion (total costs multiplied by the percentage of business use) of each common cost (such as mortgage interest, property taxes, utilities…). You also claim other costs related to the rental such as repairs and maintenance, etc..

In the personal section, you will claim in Itemized deductions the personal use portion of mortgage interest and property taxes.