Section A - Nonqualified Use of Home (Room rental)

[asarbuckle]

I am researching how to report the sale (potential) of my home.

My home is my primary residence and I have lived there for the last 20 years and in the last 2 years.

I rent out out a room to my son and have cliamed it as rental income.

Turbotax asks "Did You Use This Home for Anything Other Your Primary Home?"

Since it is my primary residence and I did rent a room I am not sure how to answer this question.

[tagteam]

Did you actually report the income on your past income tax returns?

[asarbuckle]

Yes, I have been claiming income on past income tax returns.

[asarbuckle]

I did find the following on page 13 on the IRS publication 523.

Exceptions. The following situations apply when using
only a portion of the main home for business or rental us-
age and don’t affect your gain or loss calculations.
• Space within the living area. If the space you used
for business or rental purposes was within the living
area of the home, then your usage doesn't affect your
gain or loss calculations (except for an adjustment to
basis for depreciation, taken after May 6, 1997, to be
recaptured and reported as ordinary income). Exam-
ples of spaces within the living area include a rented
spare bedroom and attic space used as a home office.

[Robert Tong]

Since you rented out part of your home, that part is subject to depreciation.

Normally if you report rental income from that room, there should be respective depreciation expense to offset the rental income.

Depreciation decreases your home's basis. This means your capital gain gets higher when you sell this home.

Capital gain = Selling price - Adjusted basis

The software is probably trying to figure out this.