For a live-in landlord filing expenses under schedule e, what is the best way to calculate my renter's percentage?

[RichardMMMM]

Using the area method to calculate, How do I account for shared space in a rental?

This circumstance is for my rental expenses as a live-in landlord (schedule E).

Turbotax mentions I could use the per person method. For example, if one person rents a bedroom in a 2br home that is 50% rental Space. Here is my situation below, please let me know how I schedule. What if I wanted to use the area method instead? How does that work?

The rental agreement gives the tenant full access to common areas.

So lets supposed the full unit is 820.

Do I subtract the unavailable part to include common areas? (Full sqft-my/landlord's room, 820-250= 570 )

OR

Do I include just their part? (Their room plus their bathroom, 240)

Again that's

Full area 820

Tenant area 240

Landlord area (unavailable to tenant) 250

Thanks!!!

[AliciaP1]

You cannot claim the full rental expense of common areas since you are also using the space for personal use.  At best, you can include 50% of the area of the common areas to calculate the percentage to apply.

In your example you would use the 240 of the Renter's space plus 50% of the common spaces, 165 (570- 240 = 330 x 50% = 165).  The total rental area based on your example numbers would be 405.

[RichardMMMM]

Thanks! That makes the most sense.

On top of that, can you think of a reason why I should prefer to use the area method rather than the person method (renter would be exactly 50% because they are 1 of 2 people living here)?

Keep in mind, in the area method results in 49%. This seems like an arbitrary difference, I am only asking because I was counseled a little differently by another tax expert and want to make sure I fully understand.

[ColeenD3]

You divide by space. Common areas are considered to be for personal use. 

[RichardMMMM]

So far we are at 2 v. 3 tax experts who believe common areas should not v. should be counted in the rented area and I want to make sure I am filing my taxes correctly.

Why do you think the common areas should not be considered 50% personal use? The renter has full access to common areas (per lease).

[ColeenD3]

It's not a matter of belief. It's a matter of what the IRS says about it.

Dwelling unit. A dwelling unit includes a house, apartment, condominium, mobile home, boat, vacation home, or similar property. It also includes all structures or other property belonging to the dwelling unit. A dwelling unit has basic living accommodations, such as sleeping space, a toilet, and cooking facilities. A dwelling unit doesn’t include property (or part of the property) used solely as a hotel, motel, inn, or similar establishment. 

Property is used solely as a hotel, motel, inn, or similar establishment if it is regularly available for occupancy by paying customers and isn’t used by an owner as a home during the year. Example. You rent a room in your home that is always available for short-term occupancy by paying customers. You don’t use the room yourself and you allow only paying customers to use the room. This room is used solely as a hotel, motel, inn, or similar establishment and isn’t a dwelling unit.

PUB 527

[RichardMMMM]

Can you clarify how this would help me to determine if I should be considering the common space as 50%business and 50%personal use rather than 100% personal use?

My renter has full access to common areas per lease, so I am confused why I would consider the common space 100% personal use (as some had suggested previously).

[ColeenD3]

The IRS specifically says that common areas are personal use. I gave you a direct quote from Pub 527.

[RichardMMMM]

From Pub 527:

How to divide expenses. If an expense is for
both rental use and personal use, such as mortgage interest or heat for the entire house, you
must divide the expense between rental use
and personal use. You can use any reasonable
method for dividing the expense. It may be reasonable to divide the cost of some items (for example, water) based on the number of people
using them. The two most common methods for
dividing an expense are (1) the number of
rooms in your home, and (2) the square footage
of your home.

Thanks