Subletting agreement income

[twocows]

In 2023, I subleased 33% of my mobile home to a tenant for about $700/mo. At the time, I was making payments on the mobile home to a banking institution who owned the home, I believe it was technically considered a LEIN. The land was and is rented from the mobile home park and is not owned by me; they also cover water/sewage/internet.

Currently, I'm filing the income from the agreement as miscellaneous income. I tried filling it out as a rental property, but it was asking for cost basis information under the assumption that I owned both the home and the land, when at the time I owned neither (now I own the home as I've paid it off in full as of January). However, obviously since this is miscellaneous income, it's taxed at the maximum value and there are no deductions on it.

I would like to know if there is a more appropriate way to file this so that I am able to deduct expenses from it, such as the monthly mobile home fees, maintenance, electric/gas, etc. Worst case, I'll just file it as miscellaneous income.

[CatinaT1]

Were you able to resolve your issue here or are you still needing guidance? 

Make sure you have ran all updates. 

If using TurboTax Online: Clear your cache and cookies. See this FAQ, for your particular browser.

If using TurboTax Desktop: Please see this FAQ.

If you still are not able to solve this, please call TurboTax Customer service.  Here is a link:  Turbo Tax Customer Service 

[twocows]

Still haven't figured this out. This is the web-based version.

[CSKcpa56 · Accepted solution]

First off, the note you were paying to the bank for your mobile home and land is a MORTGAGE not a Lien. renting out 1/3 of your home can be a rental shown on Sch E. Your cost basis is what the land and mobile home cost you. I'm not sure if you bought/rent the land under the mobile home. But at a minimum, the mobile home has a cost you paid to the bank. treating it as a partial rental will give you the ability to reduce the $700/month income by A PORTION of the water/sewer/gas/electric/property taxes/repairs, etc. Take the sf rented divived by the total sf of the mobile home. That will be the percentage to use. 

[DianeW777 · Accepted solution]

The rental income should be entered as such and reported on Schedule E. Since you entered into an agreement to purchase the mobile home and you actually completed the purchase. For this reason you should add the mobile home as an asset and my advice would be to use 33% of the cost or the percentage of rented square feet to total square feet of the mobile home.

• Cost basis of property converted to rental use after personal use:
  • Actual cost or the fair market value on the date of conversion, whichever is less.
• The mobile homes are considered personal property unless they are actually attached to the land.

Residential rental property. This is any building or structure, such as a rental home (including a mobile home), if 80% or more of its gross rental income for the tax year is from dwelling units. A dwelling unit is a house or apartment used to provide living accommodations in a building or structure. It does not include a unit in a hotel, motel, or other establishment where more than half the units are used on a transient basis. If you occupy any part of the building or structure for personal use, its gross rental income includes the fair rental value of the part you occupy.

Once you decide the cost basis to use, you will add the asset with one third of the cost basis, with a date placed in service as the date it became available for rent and then the purchase date. You can answer that you owned the property.

Expenses should be the same percentage as used to determine the rental portion of the mobile home unless there are expenses that were 100% for the rental area.  Any asset that is purchased such as an appliance specifically for the rental area would be a separate asset with a 5 year recovery period. 

@twocows