Tax issues of renting out rooms

[Jay Johnson]

I'm considering renting out some rooms in the house, while I also live in the house.

What kind of tax issues will I run into if I do this?

Say the monthly bills for the house mortgage/tax/insurance is about $1500, and
I get $600 monthly for renting out a room.

Is the $600 per month like taxable income?
Should I do something like incorporate, to be able to get numerous tax write-offs
in the maintenance of the house(is it even possible).


Jay Johnson

[jakesford]

You should report this on your 1040 on schedule E. You can deduct expenses against the rental income for the portion of you house that is being used solely as rental property.

Ex: if the room you rent is 200sqft and the entire house is 2000sqft, you can deduct 10% of your expenses such as mortgage interest, prop. taxes, utilities, repairs and maint, depreciation, etc. against the rental income. This income is passive and cant be used for EIC items, and "generally" you can only take passive losses to the extent you have passive income.

**Disclaimer** There are some special circumstances, and tax implications involved with this, and you should consult with your CPA.

BTW: document everything

[AL P]

Why not just ask them to pay in cash?

[miketyler]

good question - by law you are supposed to report all income but how would they know?.

[Fast.0]

look bro just dont claim it. I never claimed none of mine for 5 years.
thats about like saying you mowed your 80 year old neighbors yard and claimed it.

[Jay Johnson]

You are right, though the renter would have the same home mailing address as the landlord.

If the IRS would ever put 2 and 2 together, heh.

These days it seems like tax dodge'ing is what get's people into high government positions
anyway :)


Jay Johnson

[AdamLX]

I see many people who have roommates trying to refi their house and 99% never claim it on taxes so I can never use it as verifiable income... if that tells you anything.

[slow84lx]

Taxes?......What taxes?