Renting out rooms

[Unregistered]

Taxpayer is renting out 75% of his personal residence, taxpayer lives in the other 25%.

Which is proper, using Sch.E, or could Form 8829 business use of home and allocate 75% of expences, and calulate depreciation on form 8829.

[BOB W]

Rent

Schedule E is the only option. Business use of home does not apply here.

[sea-tax]

Agree with BOB W sch e is the only choice and mind you need to allocate expenses accordingly between sch e and sch a .

[jainen]

can be carried forward

>>Schedule E is the only option. Business use of home does not apply here.<<

Although income and expenses are reported on Schedule E, deductions for allocated expenses must follow the rules for business use of home. First deduct direct expenses like specific repairs and tenant insurance. Then deduct the allocated expenses that do not require a business purpose (mortgage interest and real estate taxes). Other allocated expenses, like utilities and depreciation, can only be deducted up to the amount of remaining net income. They cannot generate a loss, but can be carried forward.

[Unregistered]

Shared space

does not count as rented. Kitchen/living room/ etc unless owner is excluded from using is considered personal 100%. Exact area exclusively used as rental is your allocation basis.

[Unregistered]

Business Use of Home

Thank you all very much for your responce. Sch. E will be used. I understand about direct and indirect expenses, and not able to use co-mingled space in calculateing percentage of use. There won't be enough Sch A expenses left after prorating.

Along the same line, what about a person that is using a large home to care for the elderly. I would guess that is business use of home on Sch 8829 much like a child care business.?????

Thanks again for your time.

[Uncle Sam]

Renting Out Rooms

what about a person that is using a large home to care for the elderly. I would guess that is business use of home on Sch 8829 much like a child care business.?????

Form 8829 is used for taxpayers that use a part of their personal residence for the normal routine conduct of a full time business.
Does this person use the allocated space on a full time basis for the conduct of a business? If yes, then you can use Form 8829 to carve out business expenses for the use of a home.If not, the answer is no.

[Bees Knees]

Along the same line, what about a person that is using a large home to care for the elderly. I would guess that is business use of home on Sch 8829 much like a child care business.?????

Caring for the elderly would fall under the same rules as child care. TTB, page 5-14 says a day care facility is one where the taxpayer is in the trade or business of providing day care for children, persons age 65 or older, or persons who are physically or mentally unable to care for themselves. Under these rules, the use does not have to be exclusive use, meaning co-mingled space will qualify for a deduction.

[Unregistered]

Remember that daycare rules do not apply to foster care. If they live in the home it's not daycare.