Do I need to report income from subletting an apartment that I don't own on my taxes?

Wait, so even if you're just breaking even, you still have to report it? That seems like extra work for nothing. What if you actually lost money on the deal? Like if you had to sublet for less than your rent amount?

Yes, you still need to report the income even if you're breaking even. The IRS wants to see all income reported, even when it's offset by deductions. If you actually lost money on the sublease (like subletting for less than your rent), you would still report the income you received, deduct the full amount you paid, and the difference would be a loss. That loss may be deductible against other income, though there are some limitations on rental losses depending on your overall income and level of participation in the rental activity.

How exactly does this tool work? Is it like TurboTax or something different? I'm subletting my place while I'm studying abroad and now I'm worried I've been doing my taxes wrong.

Sounds fishy to me. Do they actually give you accurate advice that's specific to your situation or is it just generic info you could find on the IRS website for free?

It's actually different from TurboTax. Instead of just walking you through filing, it analyzes your specific tax situation and documents to give you tailored advice. You upload relevant documents or explain your situation, and it uses AI to identify the tax implications and explain what you need to do. For subletting, I just described my arrangement and provided my lease details. The advice is definitely specific to your situation, not generic. When I used it, it pointed out that since my building had a fitness center that was included in my rent, I could potentially allocate a small portion of my expenses to that amenity which my subtenant was using. That's not something I would have found in generic IRS guidance. It gives you actual tax code references and explains how they apply to your specific circumstances.

Wait, I don't understand. How is this even possible? Does this service somehow have special access to the IRS phone lines or something? I've been trying to get through to the IRS for weeks about my tax situation.

Yeah right. This sounds like complete BS. The IRS phone system is notoriously impossible. There's no way some random service has figured out how to bypass their system. I'll stick to emailing my CPA, thanks.

No special access - they just use technology to automate the waiting process. Think of it like those restaurant apps that hold your place in line and text you when your table is ready. They have an automated system that calls the IRS and navigates the phone tree, then stays on hold so you don't have to. When a real person answers, their system calls you and connects you directly to the IRS agent. It's completely legitimate. The IRS doesn't even know you're using a service - from their perspective, it's just a normal call. I was skeptical too until I tried it. I was going to spend my entire afternoon on hold, but instead I just got a call when an agent was ready. Saved me about 2.5 hours of waiting and I got the exact information I needed about reporting my subletting situation.

That's an interesting perspective I hadn't considered. In our original lease agreement, both my roommate and I were listed as tenants, and we both signed the lease. When I moved, I did get written permission from the landlord to sublet my portion, and the subtenant agreement was between me and the new person, not my roommate and the new person. Does that change your assessment of the situation? I was thinking I was the one subletting since I had the agreement with the subtenant, but maybe I'm misunderstanding how this works from a tax perspective.

Given that additional information, you're right - you would be the one considered to be subletting. Since you had a formal sublease agreement with the new tenant and permission from the landlord, you were effectively acting as the landlord for your portion of the apartment. So the advice others have given applies to your situation - you should report the rental income on Schedule E and then deduct the rent you paid as an expense. Since they match exactly, there would be no tax impact, but you still need to report it properly. I'd also recommend keeping documentation of all the payments (both what you received and what you paid) in case of any questions from the IRS down the road.

This is a really good point. I sublet my apartment in Boston and found out later that Massachusetts has specific reporting requirements for rental income. I ended up having to file an additional form with my state return.

This is really helpful advice about keeping detailed records! I'm actually in a similar situation right now where I'm subletting my place while doing a temporary work assignment overseas. One question though - you mentioned deducting phone/internet costs for handling sublet communications. How do you calculate what portion is deductible? Like, if I spent 2 hours on the phone coordinating with my subtenant, can I deduct 2 hours worth of my monthly phone bill? Or is there a different way to calculate this? I want to make sure I'm doing this correctly and not claiming too much.

Great question! For phone/internet expenses, the IRS generally requires you to calculate the business use percentage based on reasonable allocation methods. Simply tracking hours of use can work, but you need to be able to justify it. For phone costs, if you can document that you spent 2 hours total on sublet-related calls during the month, and your phone plan includes unlimited minutes, you might calculate it as: (2 hours of business use / total hours phone was available for use in the month) × monthly phone bill. However, this gets complicated quickly. A simpler approach that the IRS tends to accept better is to deduct specific business-related charges - like if you paid for a background check service, advertising fees on rental websites, or long-distance charges for sublet-related calls. These are much cleaner deductions with clear documentation. For internet, unless you upgraded your service specifically for the rental activity (like getting faster internet to handle rental inquiries), it's usually harder to justify a deduction since you would have had internet anyway for personal use. My advice: focus on the clear, documentable expenses first (advertising, background checks, any fees paid to facilitate the sublet). The phone/internet deductions can get into gray areas that might not be worth the hassle unless the amounts are significant.

This is excellent advice about setting up a separate bank account for sublet payments! I wish I had thought of that when I was dealing with my subletting situation. It would have made tracking everything so much cleaner for tax purposes. One question about the application fees you mentioned - if the property management company charged me a fee to approve the subtenant, and then later charged another fee when I had to find a replacement subtenant (the first one moved out early), can I deduct both fees? Or is there a limit on how many subletting-related fees I can claim as expenses in a single tax year? Also, did you run into any issues with your property management company about having the rent payments go through an extra step (subtenant → you → roommate → landlord)? Some companies are pretty strict about payment procedures.

Yes, you can absolutely deduct both application fees! There's no limit on the number of legitimate business expenses you can deduct in a tax year as long as they're ordinary and necessary for your rental activity. Since you had to find a replacement tenant due to circumstances beyond your control, both approval fees would be considered valid rental expenses. Regarding the payment flow, I actually got lucky with a pretty flexible property management company. I was upfront with them from the beginning about the arrangement - explained that I was relocating for work but wanted to fulfill my lease obligation, and that payments would flow through me to ensure I remained responsible for my portion. They were fine with it as long as the full rent amount reached them on time each month. Some companies are definitely stricter though. If you're planning something similar in the future, I'd recommend discussing the payment arrangement with property management before setting up the sublet. Some might require the subtenant to be added to the lease or might want direct payment from them. Better to know their requirements upfront than run into issues later. The separate bank account really was a game-changer for record keeping. Made it so easy to generate reports showing all income and expenses for the rental activity when tax time came around.

This is such great advice about treating it like a legitimate business from day one! I'm actually just starting to deal with a similar subletting situation and I wish I had seen this earlier. I've been pretty casual about record keeping so far. Quick question about the rental management apps you mentioned - do you have any specific recommendations? I'm looking for something simple that can track the payment flows (subtenant pays me, I pay landlord) and maybe categorize different types of expenses. I don't need anything super complex since this is just a temporary arrangement while I'm relocated for work, but I want to make sure I'm documenting everything properly for tax purposes. Also, when you say "landlord permission" - did you get that in writing? My property management company verbally approved my subletting arrangement but I'm wondering if I should ask for something in writing to have better documentation.

Great question about the multi-year situation! Yes, you'll need to report the income and expenses for each tax year separately. So the rental income you received in November-December 2024 gets reported on your 2024 return, and the income from January-June 2025 goes on your 2025 return. Same thing with the corresponding rent expenses you paid out - deduct them in the year you actually paid them. This is actually pretty straightforward since you're breaking even each month anyway. Just make sure your spreadsheet has a column for the tax year so you can easily filter and total the amounts for each year's return. The Google Sheets approach is perfect for this! I'd suggest adding a "Tax Year" column if you haven't already, and maybe color-coding the rows by year to make it super easy to separate when you're preparing your returns. You're definitely on the right track with the documentation - having that clear paper trail will make filing much smoother for both years.