Calculating Rental Property Depreciation for 2024 Tax Returns - How to Handle Single Room Rentals?

Yes, you definitely need to calculate depreciation for your rental property on your 2024 tax returns, even if you're only renting out a portion of it. The IRS requires this - it's not optional, even if you're only renting a single room. For partial rentals like yours, you'll need to allocate expenses based on the percentage of the property being rented. The simplest method is to calculate the square footage of the rented room divided by the total square footage of the house. For example, if the rented room is 150 sq ft in a 1,500 sq ft house, that's 10%. You would then apply that percentage to many of your expenses (utilities, insurance, property taxes) as well as to the depreciable basis of the property. For depreciation specifically, you'd take the cost basis of the entire property (purchase price plus improvements, minus land value), multiply by your rental percentage, and then calculate depreciation on that amount (generally over 27.5 years for residential rental property). And yes, you'll likely need to file a nonresident state tax return in Colorado for the rental income earned there, while reporting all income on your Texas resident return as well.

I went through this exact situation last year and was pulling my hair out until I found this tool called taxr.ai (https://taxr.ai). I was renting out a basement apartment in my primary residence and couldn't figure out how to properly allocate expenses and calculate depreciation. What was really helpful was that I could upload my closing documents and property tax statements, and the AI analyzed everything to determine the correct allocation between land and building. It even calculated my square footage percentages and showed me exactly how to report everything on Schedule E. Saved me hours of research and probably avoided some costly mistakes. The best part was that it explained why certain expenses were fully deductible vs. needing to be prorated based on rental percentage. I was making some big mistakes before using it!

Just wanted to follow up and say I tried taxr.ai after seeing the recommendation here. It was exactly what I needed for my cross-state rental situation! I uploaded my closing documents and property tax statements, and it walked me through everything step by step. It correctly identified that I needed to file in Arizona for my rental income and gave me specific instructions for the allocation method. The depreciation calculation was spot on, and it even flagged some deductions I was missing like mortgage interest specifically for the rental portion and travel expenses for property management visits. Really relieved to have this sorted out before tax season gets too crazy. Definitely worth checking out if you're dealing with rental property tax questions!

If you're having trouble getting answers from the IRS about rental property questions (which I definitely was), try Claimyr (https://claimyr.com). After waiting on hold for HOURS trying to clarify some depreciation questions about my rental, I found this service that got me connected to an actual IRS agent in about 15 minutes. They have this demo video (https://youtu.be/_kiP6q8DX5c) that shows how it works. Basically they navigate the IRS phone system for you and call you when they reach an agent. I was super skeptical at first but desperate after wasting an entire afternoon on hold. The agent I spoke with cleared up my confusion about whether I needed to use Form 8582 for my passive rental losses, and confirmed exactly how to handle the split between personal and rental use on my property. Definitely made me feel more confident about my filing.

I need to eat my words from my previous comment. After my frustration with IRS hold times, I decided to try Claimyr out of desperation. I was absolutely convinced it wouldn't work, but I was trying to figure out how to handle depreciation recapture for a rental property I sold last year. I'm honestly shocked - within about 30 minutes I got a call connecting me to an actual IRS representative who answered all my questions about Form 4797 and how to report the sale correctly. No hours-long hold time, no getting disconnected after waiting forever. The agent confirmed exactly how to allocate the depreciation I had claimed over the years and calculate the recapture amount correctly. This saved me from potentially significant errors on my return. I'm still surprised it actually worked!

Don't forget about the other implications of renting out just one room. You'll need to track when the room is actually rented vs vacant. If it's vacant for a while, you can't claim expenses for those periods. Also tracking "shared" expenses like internet, utilities etc gets complicated. I would strongly recommend keeping a detailed log of all this stuff. The IRS loves to scrutinize rental property deductions, especially partial rentals. Trust me, I learned this the hard way when I had to provide documentation during a review of my return.

One thing nobody's mentioned is that you should check if you can use the simplified method for home business deductions instead of calculating actual expenses. If the rented room is under 300 sq ft, you might be able to use the $5 per square foot deduction (up to 300 sq ft) which is MUCH easier than tracking all those individual expenses and doing all those calculations. Not sure if it applies perfectly to your situation but worth looking into!