Room Rental of Primary Residence

[Gretel]

I do not think the example you cited (http://www.irs.gov/pub/irs-pdf/p527.pdf - right column on page 22) is consistent with this discussion.

The beach cottage referenced in the IRS example had a fatal flaw when the actual rental property, viz the cottage, was also used for "excessive" personal use.

For the home-owner renting out rooms in the house, those rooms "stand alone" as separate rental properties. Hence the allocation of operating expenses, depreciation, etc.

Unless the home-owner uses those rooms for personal purposes, I do not see why a rental loss (properly calculated, of course!) could not be used as an offset to other income. Conceptually the situation is not that much different from a person who owns a duplex and rents half and lives in the other half.

FE

I only referenced the "Limit of Deductions" on the bottom of that column. Sorry for not making this clear.

The difference between renting out rooms in your home and a duplex is, 1. The duplex has a separate entrance, 2. The occupant does not use any of the "common rooms".

I still don't see how the limitation on losses would not apply.