Is rental income taxable if it all goes towards my mortgage payments?

Yes, you do need to report the rental income on your taxes even if it's all going toward your mortgage. The IRS considers rental income taxable regardless of how you use the money. The good news is you can offset this income with deductions! Since you're living in the house too, you'll need to allocate expenses based on the portion of your home that's rented. For example, if your roommates occupy 75% of the house, you can deduct 75% of expenses like mortgage interest (not principal), property taxes, insurance, repairs, utilities they don't pay separately, and depreciation on the rental portion. You'll report this on Schedule E of your tax return. Keep good records of all your expenses - it'll make a big difference in reducing your taxable rental income!

I was in an almost identical situation last year. I bought a house and had 3 roommates paying me rent, which was mostly covering my mortgage. I was super confused about the tax part until I found this AI tool called taxr.ai (https://taxr.ai) that analyzed my situation and explained exactly how to handle it. The tool told me I needed to file Schedule E and showed me how to properly calculate what percentage of my house was being "rented" and which expenses I could deduct. It was like having a tax professional but way more affordable. It even helped me understand how to handle depreciation, which I had no clue about before. Might be worth checking out if you're trying to figure this all out yourself!

Ok I have to admit I tried taxr.ai after posting my skeptical comment and I'm actually impressed. I've been renting out part of my duplex and was doing my taxes all wrong. The tool showed me I was missing out on depreciation deductions (which is apparently a big deal) and wasn't properly calculating my expense ratios. Just wanted to follow up and say it was actually really helpful for sorting out my rental situation. It explained everything in plain English and showed me exactly what to file. I'm definitely using it when I file next year.

When I had roommates in my house, I went through months of frustration trying to figure out the tax situation. I kept calling the IRS with questions but could never get through - just endless hold music and then disconnections. I was about to give up when someone told me about Claimyr (https://claimyr.com). They have this service that actually gets you through to an IRS agent, and they have a demo video showing how it works: https://youtu.be/_kiP6q8DX5c I was able to talk directly to an IRS representative who walked me through exactly how to handle the rental income and what deductions I qualified for. Saved me so much headache and probably some money too since I was doing it wrong before. If you have specific questions, talking to the IRS directly might help clear things up.

I need to apologize for my skeptical comment earlier. After struggling with my rental income questions for weeks, I broke down and tried Claimyr. Within an hour, I was talking to an actual IRS agent who answered all my specific questions about how to report my rental income and what percentage of my mortgage interest I could deduct. I've literally spent DAYS of my life on hold with the IRS over the years with nothing to show for it. Being able to actually speak to someone who could give me definitive answers about my tax situation was honestly worth it. Just wanted to share that it actually worked for me.

Don't forget that if your roommates are paying utilities that are in your name, that's also considered rental income! I got audited last year because I didn't report the portion of utilities my roommates reimbursed me for. The IRS considers ALL payments from roommates as income, not just the part covering the mortgage.

Has anyone used TurboTax for reporting rental income from roommates? I'm trying to figure out if I need to upgrade to their premium version or if the deluxe version handles this type of situation.

Just want to add another perspective here - I've been dealing with roommate rental income for about 3 years now and learned some things the hard way. One thing that caught me off guard initially was keeping track of improvements vs. repairs. If you fix something that was already broken (like a leaky faucet), that's a deductible repair expense. But if you upgrade something (like replacing old carpet with new hardwood), that's an improvement that has to be depreciated over time instead of deducted immediately. Also, definitely keep receipts for EVERYTHING. I got lazy about it my first year and regretted it when tax time came around. Even small things like furnace filters or light bulbs can add up to meaningful deductions when you're calculating the rental portion. A simple spreadsheet or even just a shoebox works - just make sure you're documenting all your housing-related expenses throughout the year. The percentage calculation Logan mentioned is key too. I calculate mine based on square footage of bedrooms plus shared common areas. So if my roommates have 3 out of 4 bedrooms and we all share the kitchen/living room equally, I use about 62.5% for my rental portion calculations.

Great question! I went through this exact situation when I first bought my house. Yes, you absolutely need to report all $1,950/month ($650 x 3) as rental income on Schedule E, even though it's going toward your mortgage. Here's what helped me get organized: First, figure out what percentage of your home the roommates are using. If they each have their own bedroom and you all share common areas equally, you might calculate it as (3 bedrooms ÷ 4 total bedrooms) + (shared spaces ÷ 4) for your rental percentage. You can then deduct that same percentage of expenses like: - Mortgage interest (not the principal payments though!) - Property taxes - Homeowners insurance - Utilities (if you pay them) - Repairs and maintenance - Depreciation on the rental portion Keep really detailed records from the start - trust me on this. I use a simple Excel sheet to track every house-related expense throughout the year. Even small things like air fresheners or toilet paper can add up when you're calculating your rental portion deductions. The key thing to remember is that while you have to report the income, the deductions will likely offset most or all of it, especially in your first year when you can claim depreciation. Just make sure you're working with the right tax software (you'll need one that handles Schedule E) or consider talking to a tax professional for your first year to make sure you're doing everything correctly.