topic Renting a room in my home in Investors & landlords

Renting a room in my home

dklittle — Wed, 15 Jul 2020 01:27:22 GMT

I rented 62.5% of my home for 2019, and I netted a loss of about $6,000. TurboTax is concluding that I may deduct this from my other income, but I'm not sure this is accurate. I believe this is based on me "Actively Participating." Is this accurate?

Thank you!

Re: Renting a room in my home

Carl — Wed, 15 Jul 2020 01:32:44 GMT

If you are renting out a room in your home, then there is no question that you do "in fact" actively participate in the management and management decisions.

Once your passive losses get your taxable passive into to zero, you can deduct a maximum of $25,000 from your "other" ordinary income. That maximum goes down once your income reaches a certain threshold though.

Re: Renting a room in my home

dklittle — Wed, 15 Jul 2020 02:30:39 GMT

Would Tax Topic 415 change this answer?

https://www.irs.gov/taxtopics/tc415

"You won't be able to deduct your rental expense in excess of the gross rental income limitation (your gross rental income less the rental portion of mortgage interest, real estate taxes, and casualty losses, and rental expenses like realtors' fees and advertising costs)."

Thank you for your thoughts!

Re: Renting a room in my home

AmeliesUncle — Wed, 15 Jul 2020 03:44:58 GMT

Is this all one home? Or is the renter in a separate "dwelling unit"?

Keep in mind that for depreciation purposes, you can only claim the percentage that is exclusively rental. "Shared" spaces do not count.

Re: Renting a room in my home

dklittle — Wed, 15 Jul 2020 03:59:51 GMT

I am effectively renting the upstairs in my home. The upstairs would appropriately be deemed the rental space.

Re: Renting a room in my home

dklittle — Wed, 15 Jul 2020 04:02:54 GMT

Additional detail:

I am renting the upstairs in my home while I continue to live in it. There are other common areas, but the upstairs is strictly rental (for 2019).

Thank you!

Re: Renting a room in my home

AmeliesUncle — Wed, 15 Jul 2020 04:24:44 GMT

If I remember correctly, TurboTax does not handle this well. As the link that you posted pointed out, if you share the "dwelling unit", you are not able to claim a loss on the property.

It's kind of a funky work-around, but you can figure out the rental percentage of the house and tinker with the rental days and personal days to make it work out. For example, if the rental percentage is exactly 50% of the entire house, you could enter 180 rental days and 180 personal days. That would prorate things by that 50%, and it would also trigger the limitation rules.