Has anyone used TurboTax to report their short-term rental income? I'm trying to figure out if the basic version will handle this or if I need to upgrade to the premium version.

One thing I haven't seen mentioned yet is the importance of keeping a detailed calendar or log of your rental activity. Since you're using the basement personally when family visits, you'll want to document exactly which days were: 1. Rented to paying guests 2. Available for rent but vacant 3. Used personally by you or family 4. Unavailable due to maintenance/repairs The IRS can be pretty strict about this documentation if you get audited. I use a simple spreadsheet with columns for date, status (rented/available/personal/maintenance), and any notes about bookings or personal use. Also, since you mentioned you sometimes let family stay there when they visit - make sure you're not charging them rent, because if you are, those days would count as rental days for tax purposes. If it's truly free family use, then it counts as personal use and reduces your deductible percentage. One more tip: take photos of the space in its rental-ready condition and keep receipts for any improvements or furnishings you buy specifically for the rental. These can help establish your basis for depreciation calculations.

This thread has been incredibly helpful! I'm dealing with a similar situation where my wife and I own our primary residence plus two adjacent lots that we've been using as extended yard space for the past 12 years. One lot has our pool and patio area, the other is mostly wooded but we use it for hiking trails and our kids built a treehouse there. Based on everything discussed here, it sounds like both lots should qualify for the capital gains exclusion along with our main house as long as we can document the residential use and sell within a reasonable timeframe. The advice about getting everything appraised together as one unit is brilliant - I'm definitely going to do that. One question I haven't seen addressed: does it matter that our lots are technically on separate parcels with separate property tax assessments? We receive three different tax bills each year, which makes me worry the IRS might view them as separate investment properties rather than part of our primary residence. Has anyone dealt with this situation where the adjacent land was on completely separate legal parcels? Also, for those who mentioned working with tax professionals specializing in real estate - any recommendations for finding qualified specialists? I want to make sure I get proper guidance before we start the selling process.

This has been such an informative discussion! I'm actually a tax preparer and wanted to add a few technical points that might help everyone here. First, regarding the separate parcel question - the IRS uses the "functional test" rather than just legal boundaries. As long as you can show the parcels were used together as your residence (which your pool, patio, trails, and treehouse clearly demonstrate), the separate tax assessments won't hurt you. In fact, I've seen cases where separate parcels actually helped establish clear ownership timelines. One thing I haven't seen mentioned is the importance of Form 8949 reporting when you do sell. You'll need to report each property separately on the form, but you can apply the Section 121 exclusion to the combined gain. I always recommend my clients include a statement explaining that the properties were used as an integrated primary residence - this proactive disclosure can prevent future IRS questions. Also, for those considering the timing of sales - while selling in the same tax year is cleanest, I've successfully handled cases where properties sold up to 18 months apart with proper documentation. The key is maintaining your narrative that they were always one residential unit, not separate investments. One last tip: if any of you have made capital improvements to the adjacent lots (landscaping, fencing, pool installation, etc.), make sure to include those in your cost basis calculations. These improvements can significantly reduce your capital gain and might even keep you under the $500K threshold if you're close to the limit.

Morgan, as someone who just went through this exact transition last year, I completely understand your anxiety! The "studio to house" analogy is perfect - it really captures how overwhelming this change can feel. I was terrified about switching from Single to HOH after my divorce, but it turned out to be much more straightforward than I expected. The IRS sees these life transitions constantly - divorce, separation, taking on caregiving responsibilities - so your situation isn't unusual at all. What helped me most was keeping simple documentation: a folder with utility bills showing my name/address, school enrollment records for my kids, grocery receipts, and a basic spreadsheet tracking monthly expenses to prove the 50% household support test. Nothing fancy, just organized records of my actual circumstances. The biggest relief came when I realized I wasn't trying to "game" anything - I was legitimately entitled to HOH status based on my real life situation. The tax benefits exist specifically for people like us who are now shouldering full financial responsibility for our households. My advice: file accurately, keep good records, and don't let audit fears prevent you from claiming the status and benefits you're legally entitled to. The tax savings can really help offset those increased expenses you're now handling solo. You're already doing the hard part (financially supporting your dependents) - the paperwork just needs to reflect that reality. You've got this! The community here is incredibly supportive if you need any other guidance along the way. 🏠💪

Hi Morgan! As a newcomer to this community, I just wanted to say how much I appreciate you sharing this question - it's exactly what I needed to hear about! I'm facing a similar transition next year when my custody arrangement changes, and reading through all these responses has been incredibly educational and reassuring. What strikes me most from everyone's advice is the consistent message that life changes like yours are completely normal and expected by the IRS. The documentation tips shared here (especially the simple folder system and 50% expense tracking) seem so much more manageable than I initially thought. I love how multiple people emphasized focusing on accuracy rather than audit avoidance - that perspective shift alone has reduced my anxiety about my upcoming filing change. Your "studio to house" analogy really resonates with me too. It perfectly captures that feeling of increased responsibility and complexity. But seeing how supportive and knowledgeable this community is gives me confidence that we can navigate these transitions successfully. Thank you for asking the question that so many of us newcomers were probably wondering about but were too nervous to post. The wealth of practical advice and encouragement in these responses has been invaluable. It's clear that with proper documentation and accurate filing, these status changes are just routine reflections of our real-life circumstances. Here's to successfully managing our new "houses"! 🏠✨

This is such a helpful thread! I'm in a similar situation and was completely lost about how to handle my scholarship money for apartment rent. Reading through everyone's experiences really clarifies things. One thing I'm still wondering about though - what if you receive scholarship money in one tax year but use it for expenses in the next year? Like if I got a scholarship disbursement in December 2024 but used it to pay spring semester tuition and rent in January 2025, which year do I report the taxable portion on? Also, for anyone still struggling with the calculations, I found it helpful to start with your total scholarship/grant amount, then subtract out your qualified expenses in this order: tuition first, then required fees, then required books/supplies. Whatever's left over after covering those qualified expenses is what you'd report as taxable income, regardless of whether you actually spent it on rent or just kept it in savings. The record-keeping advice from Molly is spot on - I wish I had started tracking everything more carefully from the beginning of the school year instead of trying to reconstruct it all at tax time!

This thread has been incredibly helpful! I'm a graduate student dealing with a similar situation and wanted to share what I learned from my university's financial aid office that might help others. One important detail that hasn't been mentioned yet - if you're a graduate student receiving a stipend or assistantship that covers housing costs, the tax treatment can be slightly different than undergraduate scholarships. Graduate stipends are often considered taxable income regardless of how you use them, and you should receive a 1099-MISC rather than having it reported on a 1098-T. Also, for anyone using tax software like TurboTax or H&R Block, most of them have specific sections for reporting scholarship income that walk you through the qualified vs. non-qualified expense calculations. It's usually under the "Education" section and asks you to enter your total scholarships/grants and then your qualified education expenses. One last tip - if you're claiming education credits (like the American Opportunity Credit), be strategic about which expenses you use for the credit versus which ones you use to reduce your taxable scholarship income. You can't "double-dip" by using the same expenses for both purposes, but you can optimize to minimize your overall tax liability. The apartment rent situation is definitely taxable income though - that part is clear regardless of whether you're undergraduate or graduate level!

Just a heads up - make sure when you pay online that you select the correct tax year that the CP2000 refers to! I screwed this up last year and accidentally applied my payment to the current tax year instead of the previous year that the notice was for. Took 3 months and multiple calls to get it sorted out.

Yes, you can definitely pay the CP2000 amount online before sending in the response form! I was in a similar situation last year and was worried about the same thing. The IRS payment system is separate from their correspondence processing, so making the payment online won't cause any issues. When you pay online through IRS Direct Pay, just make sure to: 1. Select "Notice" as the payment reason 2. Enter the correct tax year from your CP2000 notice 3. Include your SSN and the notice number if prompted 4. Keep screenshots of everything for your records After you pay, you can still mail in the response form checking "I agree" - just note on it that you've already made the payment online and include your confirmation number. This way you have both bases covered and won't accrue any additional interest or penalties while they process your response. Don't stress too much about the timing - as long as you get the payment in before the due date, you should be fine. The response form can arrive a few days later without causing problems.