Tax Benefits of Renting Rooms in My Home - Can I Deduct Home Improvements?

The good news is that as a landlord, you can definitely get tax benefits for improvements to areas your tenants use! Since you're renting out rooms in your primary residence, you'll need to allocate expenses based on usage. For your $22k bathroom renovation that's used by all tenants, you can deduct a portion of this as a rental expense. The key is determining what percentage of your home is used for rental purposes. If 3 out of 5 bedrooms are rented out, you might allocate 60% of the bathroom renovation as a rental expense. There's an important distinction between repairs and improvements though. Repairs (fixing a leak) are fully deductible in the year you make them. Improvements (like your renovation) that add value to the property must be depreciated over time - typically 27.5 years for residential rental property. Since this is a substantial renovation, you'd likely need to depreciate that 60% portion over the 27.5 year period rather than deducting it all at once. This still provides tax benefits, just spread out over time.

I was in almost the exact same situation last year! After struggling to figure out all the rental property deductions and depreciation stuff on my own, I finally found https://taxr.ai and it was a game changer for my rental property taxes. The tool analyzed all my renovation receipts and automatically categorized what counted as repairs (immediate deduction) versus improvements (depreciation). It saved me thousands because it caught things my previous tax guy missed - like how certain portions of my kitchen remodel qualified as repairs rather than improvements! It also helped me properly calculate the square footage allocation for the rental vs personal use, which was way more favorable than the simple "room count" method I was using before. For your bathroom renovation, you might be able to deduct more than you think if you get the allocations right.

Just wanted to update after trying out https://taxr.ai for my rental room situation. I'm honestly shocked at what I was missing! Even with just renting out one bedroom in my house, I was able to properly allocate a portion of my $9k HVAC system, plus some bathroom updates I did last year. The tool showed me how to correctly calculate the square footage (including the tenant's portion of common areas) which came out to 31% of my house - way more than the "one-third" my tax guy calculated just using the bedroom count. It also helped me understand which repairs I could fully deduct immediately versus what needed to be depreciated. I ended up amending last year's return and got an additional $1,700 refund! Going to use this approach for my upcoming tax year too. Definitely recommend for anyone renting rooms in their house.

If you're planning to call the IRS to confirm any of this rental property deduction stuff - GOOD LUCK! I spent DAYS trying to get through to someone about my rental property depreciation questions. Kept getting disconnected or waiting for hours. Finally tried https://claimyr.com after seeing it in a YouTube video (demo at https://youtu.be/_kiP6q8DX5c) and they actually got me connected to an IRS agent in about 20 minutes. The agent walked me through exactly how to handle my rental property improvements versus repairs, and confirmed I was calculating my room rental deductions correctly. Saved me so much stress and apparently they don't charge if they can't get you through to someone. The IRS agent also sent me some landlord-specific tax forms that I didn't even know existed that have helped me document everything properly.

Ok I have to eat my words. After I wrote that skeptical comment I decided to try https://claimyr.com anyway because I was desperate for answers about my rental property depreciation. Within 17 minutes they had an IRS agent on the phone for me. The agent walked me through exactly how to handle the bathroom renovation I did for my rental rooms. Turns out I was incorrectly calculating my rental percentage based just on room count rather than actual square footage used by tenants. The agent sent me Publication 527 specifically for residential rental property owners and explained how certain parts of my renovation might qualify as repairs rather than improvements. This could save me thousands in taxes this year. After 3 weeks of trying to call the IRS myself with no luck, this was absolutely worth it. Sorry for doubting!

One tax benefit nobody's mentioned yet is that you might qualify for the Qualified Business Income (QBI) deduction since rental income often counts as business income. This could give you a deduction of up to 20% of your qualified rental income! The rules get complicated based on your total income and other factors, but it's definitely worth looking into. I started renting out 2 rooms in my house last year and was able to claim this deduction which reduced my taxable income significantly.

Don't forget about tracking all your landlord-related mileage too! I rent out 3 rooms in my house and I keep track of every trip to Home Depot for supplies, trips to meet potential tenants, banking errands related to the rental, etc. It all adds up! For 2024 the mileage rate is 67 cents per mile for business use which includes landlord activities. So if you're doing a $22k renovation you'll probably make a ton of trips to stores for supplies and that mileage is deductible against your rental income!

Welcome to the landlord life! I've been renting out rooms in my house for about 3 years now and the tax benefits are definitely one of the best parts. For your $22k bathroom renovation, since it's used by all tenants as a common area, you'll want to calculate what percentage of your home is used for rental purposes. Don't just count rooms - measure the actual square footage! Include the rental bedrooms plus their proportional share of common areas (hallways, kitchen, living room, that bathroom you're renovating, etc.). This usually gives you a much better percentage than just dividing by number of rooms. One thing to consider with such a large renovation: see if any portions can be classified as repairs rather than improvements. For example, if you're replacing a broken toilet with a similar one, that's a repair (immediate deduction). But if you're upgrading to a luxury model, that's an improvement (depreciated over 27.5 years). A good tax pro can help you maximize what qualifies as repairs. Also don't forget about all the smaller deductible expenses that add up: advertising for tenants, background check fees, supplies, even a portion of your utilities and insurance. The mileage for all those Home Depot trips will add up too at 67 cents per mile! The rental property tax game has a learning curve but it's worth mastering. Good luck with your renovation!

As someone who's been through a similar situation, I'd strongly recommend getting professional help for a renovation this large. The $22k bathroom project will have significant tax implications that are worth optimizing properly. A few key points to consider: **Allocation Method Matters**: Don't just use the simple room count method (2 rental rooms out of 5 = 40%). Calculate actual square footage including your tenants' proportional use of common areas. This often results in a higher deductible percentage. **Timing Strategy**: Since you're planning the renovation, you have the opportunity to structure it tax-efficiently. Consider doing any legitimate repairs (fixing broken fixtures, addressing damage) before cosmetic upgrades. Repairs can be fully deducted in the current tax year, while improvements must be depreciated over 27.5 years. **Documentation is Key**: Keep detailed records of everything - receipts, photos of existing conditions, contractor invoices. Proper documentation will support your tax positions if ever questioned. **Consider Professional Consultation**: With a $22k project plus ongoing rental income, the cost of a tax professional who specializes in rental properties will likely pay for itself through optimized deductions and proper structuring. Also remember that landlord expenses extend beyond just the big renovation - maintenance supplies, advertising costs, mileage for property-related trips, and proportional utilities all add up throughout the year.