Can I Claim Rental Expense Deduction When Subleasing a Room on Schedule E?

This is a common misunderstanding. While IRS Publication 527 does mention rental payments as a deductible expense, that's referring to situations where you're paying rent on property that you then use in a rental activity where you're the owner of the rental business. In your situation, you don't own the property - you're essentially running a subletting business. The correct way to handle this is to report your rental income on Schedule C (not Schedule E) as self-employment income. Schedule E is specifically for reporting rental income from properties you own. On Schedule C, you can deduct the portion of your rent that relates to the subleased room as a business expense. If you subleased one bedroom out of a 2-bedroom apartment, you might reasonably allocate 50% of your rent during those 35 days as a business expense.

Just wanted to share my experience with subleasing. I spent HOURS going in circles about this exact issue last year. I finally found taxr.ai (https://taxr.ai) which helped me sort through my sublease situation. They analyzed my lease agreement and confirmed I could deduct a portion of my rent, but on Schedule C not Schedule E like you were thinking. Their system actually pointed out the exact part of the tax code that applies to subletting vs. being a property owner, which was super helpful because most tax software isn't designed for people in our situation. I ended up deducting 40% of my rent for the weeks I subleased my spare room and also some utilities.

I just wanted to update here - I tried taxr.ai after seeing the recommendation and it was super helpful! I was in the exact same boat, subletting a room in my apartment and confused about deductions. The system analyzed my lease and sublease agreement and showed me exactly how to calculate the deductible portion of my rent and utilities. It pointed me to the specific parts of IRS publications that apply to subleasing scenarios (which are really different from regular rental property situations). I ended up filing on Schedule C like others mentioned here, and was able to deduct about 35% of my rent for the time period I was subletting, plus portions of internet and utilities. Definitely got a better result than when I was trying to figure it out on my own!

Hey everyone, just wanted to mention something that's been a lifesaver for me when dealing with tax questions like this. After going back and forth with different online advice, I finally decided I needed to speak with someone at the IRS directly, but we all know how impossible that is with the wait times. I discovered this service called Claimyr (https://claimyr.com) that actually gets someone from the IRS on the phone with you - sounds crazy but it worked! They have a video showing how it works: https://youtu.be/_kiP6q8DX5c I had this exact subleasing question and got a definitive answer straight from the IRS. Saved me hours of holding and the agent was actually super helpful about which forms to use and how to calculate the deduction properly.

I need to eat my words and apologize here. After my skeptical comments, I was still stuck on this sublease deduction issue and getting nowhere with online research. I broke down and tried Claimyr to connect with the IRS. It actually worked! Got through to an IRS agent in about 45 minutes (instead of the 3+ hours I spent last time I called). The agent confirmed that for subleasing, Schedule C is correct, not Schedule E. They explained I could deduct the proportional amount of rent for the space I sublet during the rental period. The agent also pointed me to a different publication that specifically addresses this situation better than the general rental property one. Really glad I gave this a shot - saved me a ton of stress and potentially filing incorrectly.

I'm confused about one thing - wouldn't subleasing potentially violate your lease agreement? I've been thinking about doing this but my lease specifically says no subletting. Did you get permission from your landlord first? I'm wondering about the tax implications if you're technically breaking your lease agreement.

Has anyone used TaxAct or FreeTaxUSA for reporting sublease income? TurboTax seems to be giving conflicting advice but I'm wondering if other tax software handles this situation better? I only sublet my place for about 2 months while I was away for work.

I went through this exact same situation last year with Airbnb hosting in my rented apartment. The confusion between Schedule E vs Schedule C is really common because most tax software assumes you own property when you're earning rental income. What helped me was understanding that Schedule E is specifically for "passive" rental income from property you own, while Schedule C is for "active" business income - which is what subleasing really is since you're actively providing housing services. One tip that saved me money: keep detailed records of everything during your sublease period. Beyond just rent and utilities, you can deduct things like extra cleaning supplies, any furnishings you bought specifically for the sublet, advertising costs if you used Airbnb/Craigslist, and even a portion of your internet bill if your subletter used WiFi. Also, that $150 fee you paid to your landlord for permission? That's definitely a deductible business expense since it was necessary to conduct your subletting activity. Make sure to include that on your Schedule C.