Many families will find that it is convenient, as well as a good way to make some extra money, to rent out their homes on occasion when they are gone. They may live in a big city or some other location where they have a big holiday and lots of great sights for people to see. When they leave town, they can put up their home for rent while they are gone and make a bit of money while getting away from the crowds. And depending on the amount of times you do this during the year and how many days, you will have to make sure you are providing the right information on your tax return.
Any time that you choose to rent out a room in your home, whether it is temporary rental or for a longer period of time, you need to make sure that you are filling out the right information on your tax return. Our professionals at Tax Alternative Group are here to help you with this delicate tax issue. We want to make sure that you fill out your taxes the right way each year and that you are getting all the right deductions and credits that you deserve, even when it comes to renting out your home.
When to Claim as Income
There are a few things that you should keep in mind when it comes to claiming this kind of rental as income. First off, if you don’t have someone renting out your space for 15 or more days throughout the year, total, the IRS does not require you to even claim this income. It is seen as more of a gift if you allowed your friends or family to stay over. This can be nice considering a lot of families may leave town for a holiday weekend to avoid the crowds and then allow some guests to rent a few rooms while they are gone. If you do this once during the year, you don’t have to claim the money.
On the other hand, if you make this more of a consistent basis, with people staying over more than 15 days total throughout the year, you will need to keep good records of this and claim all the money that you are making. The IRS will consider anything over 15 days as income so keep this in mind when you start to rent out your home more often.
Deductions Allowed
You are only going to be allowed to deduct from your rental income if you have people staying for a total of 15 days or more throughout the year. This does not mean that one person has to stay for the full 15 days; you can have two or three different occasions where you rent out the space in your home throughout the year as long as the whole time is over the 15 days. If you get to this, you will be able to deduct a few things during tax season.
One thing that you can deduct from your taxes when it comes to temporary rental of a room in your house is some of the mortgage payment as well as property taxes. You will not be able to deduct the whole amount for these, but you can do this based on how many days you rented out the room in the house as well as how much space the guests used up. If you are uncertain of how to do these calculations or would like help making sure you get the right amount of the deduction, make sure to contact our professionals at Alternative Tax Group to help you out.
Deductions Not Allowed
Whether you rent out your home on a temporary basis for one weekend or you have a more permanent arrangement, you must make sure that you are only claiming the deductions that are right for you. First off, if you only rent out the room for 14 days or less throughout the year, you will not be able to claim any deductions at all. You are basically considered to have a guest in your home and you cannot claim deductions on the little money you make. You aren’t claiming this money in the first place so asking for a deduction on this money doesn’t make much sense.
If you do rent out a room in your home for more than the 15 days, there are a few things you will not be allowed to deduct. For example, since it is just one or two rooms of the home, and it is temporary rather than someone moving in on a more regular basis, you are not allowed to deduct any rental related things such as cleaning up the home before and after the guests leave. This is just considered regular cleaning, like what you would do after the in-laws come to visit, and that is how you should treat it.
When you are making an income from the temporary rental of a room in your house, make sure you are claiming the money properly. Patrick O’Hara with Tax Alternative Group, LLC in Poughkeepsie, NY is here to help. Our professionals have the experience to answer questions about your rental property as well as any other tax related questions you may have. Contact us today to get started on your tax return.
Patrick O'Hara, EA