How to Handle Taxes When I Rent Part of My House
When you rent out your property, you must include the income on your taxes using Schedule E and filing your taxes using form 1040. When you rent a portion of your own home, you are eligible to deduct part of your home owner's expenses, such as insurance, from the amount you are required to pay income taxes on. To determine this amount, you need to determine the percentage of your home you are renting out.
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Instructions
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Calculate the amount of rent you are responsible for reporting. Most people use the cash method of accounting, which means you report income in the year you receive it, not the year for which the rent is due. For example, if you received rent for Jan. 2010 on Dec. 15, 2009, you would include that rent income on your 2009 return.
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Determine the square footage of your home that you rented out. For example, if you rented one 14-foot by 20-foot room, you would be renting out 280 square feet.
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Divide the amount rented out by the total square footage of your home to determine the percentage of your home you rented out. For example, using the number above, if your house had a total 1,400 square feet, you would be renting out 20 percent of the home.
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Complete Schedule E to document your rental income and expenses. To determine your expenses, multiply the percentage of your home that you rent out by the total expense for your home. For example, if your homeowner's insurance cost you $1,000 per year and you rented out 20 percent of your home, you could include $200 as a rental expense.
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Report the total gain (or loss) from your rental on the "Rental real estate, royalties, partnerships, S corporations, trusts, etc." line in the "Income" section of form 1040. For 2010, this is line 17.
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