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Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: AlexAG on February 20, 2015, 11:56:07 AM

Title: Rental Room Tax Question
Post by: AlexAG on February 20, 2015, 11:56:07 AM
I have a question about my taxes for a room I rent out in my house.  I end up with a "loss" after deducting mortgage interest and property taxes, and our MAGI is too high to deduct the passive losses.   Am I allowed to not deduct the expenses of interest and taxes? If I don't include the portion of those expenses against the rental then I can deduct them from my income and end up with a better tax return. Most resources I've found indicate I "can" or "may" take those expenses, implying I also can not take those expenses, but they are not explicit. Basically my question is: am I required to deduct interest and property tax expenses from my rental income?
Title: Re: Rental Room Tax Question
Post by: MustacheMcHermanson on February 22, 2015, 08:29:32 PM
Hey there,

I'm going through this too, but we didn't end up with a loss.  I'm not 100% on how to do this anyway, but I'll give you my understanding.  First, if you are not already, make sure you are splitting the expenses between personal and rental use.  For example, if you rent only one room, calculate the percentage of the house that is rented.  So, if you have a 1500 sq. ft house and a 10x15 room for rent, you are renting 10% of the house, and can deduct 10% of the interest and property taxes (and a few other things) from your rental income, but the remaining 90% would be deducted as usual from gross income as itemized deductions.  If you are renting at a very cheap price (less than market rate), you may not be able to deduct any expenses against rental income.