Rent out one room of an investment home, having two vacant rooms

[ltkm]

I have an investment home that is not my primary home.

In 2023 I rented out a room with intention to rent out all 3 bedrooms. 

But the deals did not go through so I ended up with one tenant.for the

entire 2023.

This person was the only one in this house in 2023. The rent payment

is about 1/3 of the fair market value  as I intended to rent all 3 rooms.

So I have 1 rented room and 2 vacant rooms in 2023.

I think I cannot treat this as a house rental  because the rent price is below the fair market value.

But how can I deduct earning and expenses on vacant rooms ?

I do not live in this house so there is no sharing, no percentage of rooms.

But I don't know how to calculate percentage of vacant rooms and

|shared" areas.

Thank you for your advices  and pointers to helpful information.

Long,

[DianeW777]

It depends.  The intent was to use this property for a residential rental activity. The question is whether you intend to pursue this in 2024.

For 2023, if the room rental was at fair market value, then you can use square feet to determine the percentage of business use.  You would uses this same percentage on expenses.  My advice would be to enter these numbers yourself without choosing TurboTax to do that for you.  You may have expenses that are specifically for the room and you don't want those limited if applicable.

If you decide this was a 'not for profit' rental for 2023, then you can use the following steps to enter the income, however the expenses will not be allowed.

1. Wages and Income
2. Scroll to Less Common Income; Click Show more (if start isn’t displayed)
3. Click Start across from Miscellaneous Income, 1099-A, 1099-C
4. At the “Other Taxable Income” screen, enter your description – Not for Profit Rental and then amount of income you received.

[ltkm]

Thank you for your quick reply.

In 2024, the renter is still renting a room and intended to stay for the entire 2024

and I still  look for more tenants.

I cannot sell this property at this time because of other tax implications,

a surge in income, and high interest rate for another house.

I should rent out the entire house but that is another story.

If I intend to continue with this room rental, then how do I report income and deductions. 

If you can point me to any IRS publications, I would appreciate very much.

This is what I have in mind. I am still looking for correct answers.

1- 3 rooms. 33% percentage of each

2- Rental income. 1 room, say, $1000. Income from other 2 rooms are $0

3- shared expenses such as electricity, water deduct 100% because there is no sharing.

4- Property tax and home insurance,  mortgage interest... deduct 100%

because vacant rooms also have expenses.

If this does not sound right, then what is the right way to report my 

situation?

[RobertB4444]

You are correct in how you report the deductions PROVIDED you are attempting to rent out the available rooms and you have them as available to rent and - if you were asked - you could prove that you are attempting to rent them (copies of ads or listings on websites, etc).  

In that case, the entire house is a valid rental property - and even though the other two rooms were not rented - as long as they were available to rent and you were actively attempting to rent them then you're all good.

@ltkm 

[RobertB4444]

Here is an excellent resource on rental property.

@ltkm 

[ltkm]

Thank you for your advice and resources.

The entire house is for rent , just by room. I will need to keep records

and be active in the renting activities.