How to properly report rental income on taxes for owner-occupied home?

I purchased my first house in late 2023 and started renting out one bedroom beginning January 2024. I understand I need to report this as income, but I'm struggling to figure out exactly what deductions I'm allowed to take. The total rent I collected was $12,500 for 2024. My monthly mortgage payment is about $2,900. I think these are the deductions I can claim: - Mortgage interest: The rented room is approximately 12% of my home's total square footage. My total mortgage interest was around $18,200, so I believe I can deduct $2,184. - HOA fees are $250 monthly (covers exterior maintenance and landscaping), totaling $3,000 for the year. - Depreciation calculations completely confuse me - if anyone has a good resource to understand this, I'd be super grateful! - I cover gas and water bills, but my tenant and I split the electricity and internet/cable costs. - Property taxes were $3,600 for the year. - Insurance premiums came to $1,900. - Since it's a newer construction, I didn't have many repairs, but I'm wondering what other expenses might be deductible. Any insight would be really helpful! This is my first time dealing with rental income while living in the same property.

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18 comments

Callum Savage

•8M

When you rent out part of your primary residence, you're essentially running a small rental business. Here's what you need to know: For deductions, you'll need to allocate expenses based on the percentage of your home that's rented (12% in your case). You've got the right idea with mortgage interest. The same percentage applies to property taxes, insurance, HOA fees, and utilities you pay entirely. For depreciation, you'll only depreciate the rental portion of your home (not the land). Take your home's value (minus land value), multiply by 12%, and divide by 27.5 years. For example, if your home value minus land is $300,000, your annual depreciation would be about $1,309 ($300,000 × 12% ÷ 27.5). For the shared utilities, you can only deduct the tenant's portion. So if you split electricity 50/50, you can deduct 50% of that 12% allocation. Don't forget to track any expenses specifically for the rental room like repairs or furniture you purchased for the tenant's use - these are 100% deductible. You'll report everything on Schedule E. Keep detailed records of all income and expenses in case of an audit!

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Callum Savage

•8M

You can check your property tax assessment which often separates land and building values. If not available, a common rule of thumb is that land represents about 20-30% of total property value, but this varies by location. You could also check comparable land sales in your area or consult with a local real estate professional. For the blinds in the tenant's room, since they cost less than $2,500, you can likely deduct them 100% in the year purchased under the de minimis safe harbor rule. Alternatively, you could depreciate them over their useful life (usually 5-7 years). The 100% deduction is generally more advantageous.

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Ally Tailer

•8M

I was in exactly the same situation last year and found this amazing tool called taxr.ai that helped me sort through all my rental income questions. I was super confused about what percentage of expenses I could claim and how to handle the depreciation calculations properly. I uploaded my mortgage statements and a few other documents to https://taxr.ai and their system analyzed everything and broke down exactly what I could deduct. It explained the whole "business percentage use" concept really clearly and showed me deductions I had no idea I could take (like a portion of my internet since the tenant uses it). The depreciation calculation was actually straightforward once their system walked me through it. Saved me hours of confusion and probably got me a bigger refund than if I'd tried figuring it all out myself.

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Ally Tailer

•8M

It doesn't file your taxes, but it creates a detailed report that shows exactly what numbers to put where on Schedule E. I just followed that guidance when filling out my tax software and it was super straightforward. It works alongside whatever tax program you're already using. For filing, I didn't need a tax professional after using it. The report explained everything so clearly that I felt confident filing myself using TurboTax. It highlighted all the partial deductions and even flagged some additional home office deductions I qualified for that I had no idea about.

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Miranda Singer

•8M

Just wanted to update everyone - I tried taxr.ai after seeing it mentioned here, and wow, what a lifesaver! I was totally confused about how to handle my rental income (I rent out my basement), especially the depreciation calculations. The system asked me questions about my property, analyzed my documents, and gave me a complete breakdown of all eligible deductions. It even showed me that I could deduct a portion of my internet bill and some maintenance costs I didn't think qualified! The depreciation section was especially helpful - it calculated everything automatically and explained the reasoning. What would have taken me hours to research was done in minutes. Definitely using this for next year's taxes too!

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Cass Green

•8M

If you're having trouble getting answers from the IRS about your rental property questions, I highly recommend Claimyr. I spent literal weeks trying to reach someone at the IRS for clarification on partial residence rental deductions. After countless busy signals and disconnections, I found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c. They actually got me connected to a real IRS agent in under 20 minutes! The agent walked me through exactly how to handle my situation with renting out part of my primary residence. They explained the "personal use" vs "rental use" distinctions that were confusing me and confirmed which expenses I could partially deduct. Seriously saved me so much frustration.

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Cass Green

•8M

They have a system that automatically navigates through all the IRS phone menus and holds your place in line. Once they're close to reaching an agent, they call you so you can join the call. No need to sit on hold for hours! You just carry on with your day until they text you that they've almost reached an agent. They connected me with someone in the specific department that handles rental property questions. The agent was really knowledgeable about Schedule E and partial residence rentals. She cleared up my confusion about depreciation and explained exactly how to allocate shared expenses. Much better than trying to interpret IRS publications on my own!

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Madison Tipne

•8M

I have to admit I was super skeptical about Claimyr, but I was desperate after spending hours trying to get clear answers about my rental situation. I tried the service yesterday and I'm honestly shocked - they got me through to an IRS representative in about 15 minutes! The agent answered all my questions about renting part of my primary residence. She explained exactly how to calculate my "business percentage" correctly and confirmed I was handling my utility allocations properly. She even walked me through a depreciation example specific to my situation. I've been stressing about this for weeks, and now I feel completely confident about how to file. Would have saved myself so much headache if I'd just used this service sooner instead of endlessly googling and getting conflicting information!

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Holly Lascelles

•8M

Don't forget about repairs vs. improvements! This tripped me up last year with my partial rental. Repairs (fixing something broken) are fully deductible in the year you pay them (at your rental percentage). But improvements (making something better than before) need to be depreciated. Example: Fixing a leaky faucet = repair. Installing a brand new shower = improvement. Also, if you provided any furniture for the rental room, you can depreciate that over 5 years. And keep track of mileage if you ever drive to buy supplies specifically for the rental portion!

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Holly Lascelles

•8M

Painting is generally considered a repair if you're just maintaining the property - so that's deductible in the year you paid for it. Since it was specifically for the rental room, you can deduct 100% of that cost rather than just your rental percentage. Cleaning supplies used specifically for tenant turnover are absolutely deductible! Keep receipts for everything. I created a separate credit card just for rental expenses to make tracking easier at tax time. Anything that's "ordinary and necessary" for your rental activity qualifies as a deduction.

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