Tuesday, August 7, 2012

Renting Out Your House or a Room? Deduct Expenses!!

If you have an investment property or you just rent out a room of your house, practically every expense on that house or room is completely deductible. Repairs to the investment property, any improvement cost, or expense are completely tax deductible.

If you just rent out a room of your house you have to divide what is for the room and what is for the rest of the house. Items and portions only for the rented room are tax deductible. So if new carpet is needed in the whole house, only count the cost of carpet for the square footage for the rented room as a deduction. Same thing for blinds, painting, or even providing your tenant with furniture. All items for the rented room are tax deductible.

Expenses for your entire home must be divided between the part you rent and the part you live in. This includes your payments for:
  • mortgage interest.
  • repairs for your entire home; for example, repairing the roof or furnace, or painting the entire home.
  • improvements for your entire home; for example, replacing the roof.
  • homeowners insurance.
  • utilities such as electricity, gas and heating oil.
  • housecleaning or gardening services for your whole home.
  • trash removal.
  • snow removal costs.
  • security system costs.
  • condominium association fees.
If the entire home is rented out, this is all deductible in it's entirety if the payment is your responsibility. You can also deduct depreciation on the part of your home you rent.