Rental/Roommate -- How to declare income?
Alice Harman
How do I declare monies received from my roommate? I
own the home. Her share is about half of the PT&I,
but less than going market rate for house-shares. Do
I have to put the gross amount above the line? Or can
I deduct 1/2 of mortgage interest from the gross
BEFORE I put it above the line? Do I have to file
Schedule E? I'm not in this for a profit -- I work
120 miles away and am gone during the week; having a
roommate keeps the houses occupied for security, and
helps me to offset the rent I have to pay for a little
place during the week where I work.
I don't make all that much money, and have significant
expenses in trying to keep two places and commute. I
have a real special job that I love; and no, I can't
sell my house and move permanently to my working
location.
I'd really like to be able to deduct $2000 for my IRA
contribution, but the rental income will just put me
over the limit.
Appreciate any advice.
Alice Harman
Confederated Tribes of Warm Springs
aha...@teleport.com
nrichard
If you wish to declare this income, you need to use
a Schedule E. You can deduct 1/2 the interest,
utilities, repairs & maintenance, property taxes,
and insurance. Plus you can depreciate the home.
I would suggest getting some help doing this form
the first year; after that you can probably do it
yourself. If you are not tax paranoid, you can get
one of the many good tax books and follow their
directions. Good luck.
HUGBEARBOB
> How do I declare monies received from my roommate?
It depends.
If your roommate simply throws in money to help with
living expenses, can live there whether or not she
does pay any *specific* amount, and you are not
looking to make money over what it costs you to have
her live there, you are not engaging a rental activity
for profit, but simply an expense sharing arrangement
that has no tax reporting requirements.
If you require that she pay rent, but aren't charging
a fair market rent and don't intend to profit (which
is what it sounds most like), your rental income is
reported on Form 1040, line 21 and applicable direct
expenses on line 30 (See the instructions for those
lines.)
If you are renting the space with a profit motive,
you report your GROSS rent and related expenses on
Schedule E. Be sure to indicate that you also
occupy the premises, which will preclude you from
deducting any expenses in excess of the rent
received.
For further info, you may want to order IRS
Publication 527.
TaxService
aha...@teleport.com (Alice Harman) writes:
Alice, you're pretty much between a rock and a hard place!
If you are not engaged in renting out for a profit, you
report your rental income on Line 21 of Form 1040, your
deductions are limited, and no losses are allowed as a
deduction from total income. Expenses for mortgage
interest, taxes and casualty losses would be deductible
only on Schedule "A: as itemized deductions.
Other business deductions such as advertising, utilities,
insurance, etc. are deductible on Schedule "A" subject to
a 2% reduction based on your adjusted gross income.
Depreciation is another factor that is considered under
the 2% reduction rule.
Sadly, your commuting expenses appear not to be
deductible! It is difficult to give advice when we don't
know all of the facts, some of which might serve to reduce
your tax liability. Sit down with a local professional to
see if you can find any legitimate ways to use your
mileage and rental expense, away from home, as business
expense.
"Jack"
John H. Fisher - TaxSe...@aol.com
Philadelphia, Pa. - Atlantic City, NJ - West Wildwood, NJ
Where ignorance is bliss, 'tis folly to be wise!!