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mefjr
Level 2

Interest deduction on primary residence with rented room

Rented room in primary residence.  Input mortgage interest in rental property income section.  Input mortgage interest in deductions section.  When checking Schedule A, it seems to have placed percentage of  interest from rental section in line 8A, but full amount of mortgage interest in 8B, leading to interest income adding up to more than the total interest reported on 1098.  Should I change the input in deductions section to reflect the total interest minus the rental portion of the interest?

7 Replies
MinhT1
Expert Alumni

Interest deduction on primary residence with rented room

Yes, you should change the mortgage interest and property taxes you claim in Deductions and credits.

 

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.

 

Please read this IRS publication, paragraph on Renting Part of Property on page 16.

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mefjr
Level 2

Interest deduction on primary residence with rented room

Turbotax calculated percentage to be used in rental deduction.  Seems like it should have done same for personal use section.  Thanks for answer.

ColeenD3
Employee Tax Expert

Interest deduction on primary residence with rented room

It does not. Schedule E and Schedule A information is not linked. This is true for both mortgage interest and property taxes.

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OhhTaxes
Level 1

Interest deduction on primary residence with rented room

I think I have the same question as I rent out a room in my condo, but I didn't understand the answer.

 

On TTDeluxe, are you saying I need to deduct the percentage of the condo expenses (mortgage interest, insurance, property taxes) in the "deductions and credits" section that lowered my "rental income"? I.e. would the % of my insurance that was deducted from my overall rental income become double-counted if I listed the full amount in my "Your Home" --> 'Mortgage Interest, Refinancing, and Insurance' section?

AmyC
Employee Tax Expert

Interest deduction on primary residence with rented room

@OhhTaxes You are filing a sch E for rental income and expenses. See About Schedule E (Form 1040 or 1040-SR), Supplemental Income and Loss.

 

For example: Say you rent out 20% of your home. Then 20% of your insurance, mortgage, utilities, etc would go against the income produced.

 

Insurance is not a tax deduction for a homeowner. Only landlords deduct insurance. So, as in the example above, only 20% of the insurance would be deducted, on sch E. The rest is not deductible.

 

Mortgage interest is deductible. Following the example, 20% on sch E and 80% on sch A, itemized deductions.

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OhhTaxes
Level 1

Interest deduction on primary residence with rented room

Thank you, that makes sense outside of the TT program. I see that the TT program does not make use of the % of dwelling rented out in its calculations.

AmyC
Employee Tax Expert

Interest deduction on primary residence with rented room

@OhhTaxes Yes the program can be used to calculate that for you.

  1. Edit your rental,
  2. edit general information. 
  3. When you select the type of rental, select Other and the description could be room rented.
  4. Then select under Situations that you rent out part of your home.
  5. Was it rented all year? The personal use refers only to the rented room, not the rest of the place. Enter days the room was rented.
  6. continue through more screens until
  7. Let us Calculate Deductions - choose to do the math or let the program. If you choose the program, it asks for the percentage.
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