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Renting Out Shared Property? What To Consider About Your Taxes

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Do you own a property that you plan on renting out part of? This can include a home that is a duplex, a basement, or even a single room. Renting gives you the ability to write off some of your expenses on your taxes, but it makes things much more complicated living in a shared space. Here are some things to consider about dealing with your taxes in this situation.

Separating Records

It is important that you keep detailed records for expenses relating to your rental space. You'll want to make note of expense for the entire building, the specific space that is being rented, and expenses relating to the part of your home that you're using. Each expense is used in a different way when it comes to your taxes, and it will help to keep things separated as well as you can until it's time to sort out the paperwork for tax time.

Tracking Expenses

By renting part of your home for additional income, you'll be able to claim all of the expenses related to this side venture and reduce how much you owe in taxes. All expenses directly related to the rental property can be counted as a write-off. This includes advertising the space, cleaning costs, ongoing maintenance, utilities that are shared, and even costs associated with office supplies that are needed to handle rental property related business. You also will have the ability to deduct depreciation on the property itself.

Calculating Deductions

Be aware that your personal deduction on your property will change based on how much of it is rented out. If you own a duplex, it may be as simple as dividing expenses in half. However, renting out a room will require you to figure out what percentage of the home the room occupies based on square footage.

Anything that is done to the home as a whole would be considered a shared expense for the space you are renting and will need to be divided appropriately as a business expense. Things can get complicated, with a roof repair not being fully deductible, or having a lawn service cut your grass when both you and your renters use the space.

If you need help deciding what kind of expenses are deductible and how much can be deducted, consider seeking out out the assistance of an accountant. They are well familiar with all of the expenses that qualify for a deduction and can help you think of things that you may have otherwise ignored. If you find that you have any legal troubles because of how you filed your taxes, consult with a tax lawyer