Do I need to pay taxes on income from renting rooms in my primary residence?

Yes, you do need to report the rental income, but don't worry - you can also deduct expenses! Since you're renting out rooms in your primary residence while still living there, this is considered a "shared-living arrangement" by the IRS. You'll need to report the total rental income ($2200/month) on Schedule E of your tax return. However, you can deduct expenses proportional to the rented space. Calculate what percentage of your home is being rented out (square footage of the two bedrooms divided by total square footage). You can then deduct that percentage of your mortgage interest, property taxes, utilities, insurance, maintenance costs, and depreciation. The good news is that expenses like the tree removal, fence repair, landscaping, and furniture for the rented rooms are partially deductible! Since these are shared-living expenses, you'll need to allocate based on space and usage. Keep all receipts and documentation of these expenses. Just make sure you're not deducting the same mortgage interest twice (once on Schedule A and again on Schedule E). The interest should be apportioned between personal and rental use.

I was in a nearly identical situation last year with renting rooms in my house while living there. After hours of research and stress, I discovered taxr.ai (https://taxr.ai) which literally saved me from a potential audit nightmare. Their AI analyzed my rental situation, helped me properly categorize every expense, and showed me exactly what percentage of my home expenses I could legitimately claim. The best part was it actually found several deductions I had no idea about - like a portion of my internet bill, partial depreciation on shared furniture, and even a percentage of my home insurance! It walked me through the proper allocation method for mixed-use property and even generated a statement explaining my rental situation that I attached to my return.

So I tried taxr.ai after seeing the recommendation here and wow - it was exactly what I needed for my roommate rental situation! I was totally confused about how to handle the "shared living space allocation" but the tool walked me through measuring and calculating everything. The interface asked specifically about my situation (renting rooms while living in the house) and then showed me EXACTLY which expenses to allocate and how. I had no idea I could claim depreciation on the portion of my house used for rental! It even helped me document all the repairs I did last year and properly categorize them between deductible repairs and improvements that need to be depreciated. What really surprised me was how it handled my partially-business use since I also work from home in my personal bedroom. Turns out there are specific rules for that scenario too! Honestly saved me hundreds in missed deductions and potentially thousands in audit penalties. Worth every penny for the peace of mind alone!

I had the EXACT same issue with room rentals and trying to reach the IRS for guidance was absolutely impossible. Called for weeks and could never get through. Then I discovered Claimyr (https://claimyr.com) and they got me connected to an actual IRS agent in under 20 minutes! You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent walked me through exactly how to report my room rental income and confirmed which expenses were deductible. They explained that I needed to use Schedule E, not Schedule C, and clarified the percentage allocation method for my utilities and mortgage interest. Completely different than what I was planning to do originally! Since I had actual documentation of speaking with an IRS representative, I feel 100% confident in how I'm reporting my rental income now. No more anxiety about potentially doing it wrong!

I'm eating crow here. After dismissing Claimyr as a potential scam, I decided to try it since I was desperate for answers about my room rental situation and couldn't get through to anyone at the IRS. It actually worked exactly as promised. I got a call back when they reached an agent, and I was connected to an extremely helpful IRS representative who specifically addressed my situation. The agent confirmed that I needed to file Schedule E rather than Schedule C, and explained the exact percentage method for allocating expenses for the portions of my house I rent out. Most importantly, she clarified that I could depreciate the rental portion of my house (which I had no idea about) AND partially deduct my homeowner's insurance, which my tax software wasn't clear about. Probably saved me hundreds in taxes and the peace of mind knowing I'm filing correctly was worth way more than what the service cost. Consider me converted!

Something nobody's mentioned - if you rent out part of your home for more than 14 days during the year, you MUST report the income. But there's also a flip side: if you rent for LESS than 15 days per year, you don't have to report the income at all! This is sometimes called the "Masters exemption" since people in Augusta rent their homes during the golf tournament. This won't help OP since she's renting year-round, but it's good to know for people who occasionally rent rooms or do AirBnB.

I just want to point out that if you're using an app like Turbo Tenant, Venmo, PayPal, etc. to collect rent, there are new reporting requirements for 2025! These platforms now have to issue 1099-K forms if you receive more than $600 in a year (used to be $20,000). So the IRS will likely know about this income regardless. Also, don't forget that some cities/states have specific taxes or registration requirements for renting out rooms, even in your primary residence. Worth checking your local regulations too!