Renting Rooms: Income

How Much to Charge

Find Roommates

Why Rent Rooms?

Collecting Rent

Tenant Evictions

Renting a Room in a House - Tax Consequences

Renting a room in a house means you'll have income to report and taxes to pay. You might get away with not reporting the income from one room rented out in your home. Collect cash only, don't deposit the money, keep no records - and go to jail if you get convicted of tax evasion. Maybe it would be better to play it straight.

This will be a relatively short page. In fact, I can sum it up in two sentences:

1. Keep records of everything.

2. Get professional help with your taxes.

Oh, and let me add this:

The author has used his best efforts to verify the information contained in this e-book, but makes no warranties with respect to the accuracy or applicability of the information. The author shall not be held liable for loss or damage resulting from use or misuse of the material here.

I always did my own taxes (and rarely took my own advice). It isn't as complicated as it seems. You will report your rental income, expenses and net profit on Schedule E of your tax return. All rent collected will have to be reported, of course. Some of the things you can report as expenses include:

Heating fuel
Electricity
Water
Garbage collection
Property taxes
Home owners insurance
Repairs

These things are housing costs, and since it is your own home, you can't deduct the entire amounts as expenses. In fact, if it is a three bedroom home and you rent out just one room, you probably get to deduct just one third of these costs. Ask a tax guy about this part. If you built your own efficiency to live in at the back of the house, and you don't "live" in the other part with your tenants, you might get to deduct more.

Things which are directly a cost of renting the rooms are normally 100% deductible. These include things like:

Advertising costs.
Legal advice for evictions.
Charges from your bank for a bounced check from a tenant.
Carpet cleaning bills if they are for just the tenants rooms.

And so on... To sum up again:

1. Keep records of everything.

2. Get professional help with your taxes.

Renting a room in a house is not a tax-free enterprise.

Rent Rooms Homepage - Renting a Room in a House - Tax Consequences