How to split rental income and expenses for a partially rented primary residence with spouse?

Thanks for the clarification! That makes sense about the joint filing. So for things like our property tax ($4,200/year) and mortgage interest ($14,500/year), I would just allocate 40% to rental expenses? What about repairs we did specifically only in the rental portion? Can I deduct 100% of those costs or still just 40%?

For joint filers, the split between you and your spouse doesn't matter - it all goes on the same return. You've got the right idea about the general expenses - yes, allocate 40% of your property tax and mortgage interest to the rental. For repairs specific to only the rental portion, you can deduct 100% of those costs as rental expenses. So if you replaced the carpet only in the rental area, that's fully deductible as a rental expense. Just make sure you document these expenses well, noting which were specific to the rental portion versus whole-house expenses that need to be prorated.

Does it also handle the recapture thing if you sell later? I heard you have to pay back depreciation at some point and I'm clueless about tracking that.

How accurate is it really? I tried another "AI tax helper" last year and it made some pretty obvious mistakes with my rental property. Ended up having to redo everything manually anyway.

Yes, it actually creates a depreciation schedule that tracks your basis reductions over time, which helps tremendously with calculating depreciation recapture if you sell. It explains how much you'll likely owe when you eventually sell the property. Regarding accuracy, I was skeptical too after trying some other tools. The difference with taxr.ai is it specifically handles complex real estate scenarios with built-in rules for partial rentals. It actually showed me where I had been incorrectly calculating my deductions in previous years. You can also have a tax pro review the calculations through the platform if you're uncertain.

Wait, so this service just holds your place in line? Doesn't the IRS have a callback feature already? Seems like paying for something you can get for free.

Sounds sketchy. Why would I trust some random service with my phone number when I'm dealing with tax matters? How do you know they're not recording your conversation with the IRS?

The IRS callback feature is only available sometimes, and often not for specialty departments. When you have rental property questions, you usually need to speak with someone in a specific department, and those queues rarely offer callback options. This service works for all departments. Regarding privacy concerns, they don't stay on the line or record your conversation - they simply connect you with the IRS agent and drop off. I was hesitant too, but after spending nearly 3 hours on hold one day before getting disconnected, I was desperate. It's just a call notification service, not unlike what many doctor's offices use.

I'm so glad you mentioned depreciation! I was planning to skip it because it sounds complicated and I heard it causes you to pay more taxes when you sell. Is that true? Do I really HAVE to take depreciation?

Yes, you absolutely must take depreciation - it's not optional according to IRS rules, even though many people incorrectly skip it. The frustrating thing is that you'll be taxed as if you took the depreciation when you sell, even if you didn't actually claim it on your returns. This is called "depreciation recapture." When you sell, you'll pay a 25% tax rate on all the depreciation you should have taken, whether you claimed it or not. So you might as well get the tax benefit now. Most tax software can calculate this for you if you enter the date you started renting, the property's value, and the rental percentage.

Is there a good system for tracking this stuff throughout the year? I always end up scrambling at tax time trying to figure out which expenses were for what.

I use a simple spreadsheet with columns for Date, Description, Amount, Category (100% Rental vs Shared), and Notes. Throughout the year, I just snap photos of receipts with my phone and enter them weekly. For shared expenses like utilities, I set up automatic reminders to record them monthly with the 40% allocation noted. At tax time, I just filter by category and everything's already organized. Takes maybe 15 minutes a week but saves hours of headache later!

This is really helpful, especially the distinction between home office vs rental property! I hadn't thought about being able to deduct advertising costs and mileage. Quick question - for the startup costs you mentioned, is there a limit on how much you can deduct in the first year? I spent about $2,800 getting the rental area ready (new flooring, paint, fixtures) before my first tenant moved in. Can I write all of that off this year or does it need to be spread out somehow? Also, the separate bank account tip is gold - I've been mixing everything together and it's been a nightmare trying to separate personal vs rental transactions. Definitely setting that up before next year!