Do you rent out a room of your house? Does your home include a basement apartment? When you rent out a portion of your primary residence, you can divide many expenses between the portion used for the rental and the portion you utilize for personal use. Expenses related to the rental part of the property may be deducted.
When you rent out part of your home, you can deduct the rental portion of expenses such as:
- Home mortgage interest
- Real estate taxes
- Home repairs
Additionally, expenses that are related only to the rental part of your house, such as painting the rental unit or liability insurance premiums related to the rental, do not need to be divided. Since they are related solely to the rental, they can be deducted in their entirety.
The good news is that the rules for allocating rental use and personal use expenses are not set in stone. Many homeowners opt to assign expenses based either on the number of rooms in the house or on the home’s square footage. However, any reasonable approach to dividing the personal and rental costs should be acceptable. For example, dividing the cost of water based on the number of people using the utility might make the most sense.
Have additional questions about the tax implications of renting out part of your primary residence? Just ask! Taxation Solutions, Inc. is available to put our 40+ years of expertise to work for you. Call our team today.