So I am finishing up taxes for 2022, and for less than 3 months I had a renter. I entered the rental income and then expenses such as cleaning, utilities, mortgage interest, repairs, etc. I lived in the home the entire year, so I prorated the expenses for only the days I had a renter, plus I divided them in half since we shared expenses like Utilities.
I am confused about the Depreciable Asset part of the rental. Do I have to claim a Depreciable asset if I only rented a room for less than 3 months? I started down the path of doing it, and it seems really complicated, and I’m not sure how I can possibly calculate how much of the house, which was rented for 75 days, a 200 sq ft room, etc depreciated…plus the cost of the land? If I just don’t claim a Depreciable Asset, will I be penalized for it later? I’m not really concerned about writing off any of the rental income, I just want to make sure I’m doing everything legally.
I’m most familiar with the taxes when you rent out an entire property. Here’s an article on how to do it for a room in a house:
You don’t depreciate the cost of the land. This is usually broken out on a property tax assessment.
Yes, when you sell. It’s not so much a penalty, as you’ll be taxed for this deduction through depreciation recapture. You’ll pay this when you sell the house, whether you took the depreciation allowance or not. It can be up to 25% of the allowable depreciation amount. You’ll end up calculating it when you sell, so you may as well calculate it now and take the deduction.
Keep a copy of these at least taxes until you sell the house.
Thank you so much for sharing that article…I feel like I google searched and had so little luck finding anything relevant. Also thank you for explaining the depreciation…I figured if I didn’t get a tax break now, no worries, but it sounds like it will still come back to haunt me later on if I sell. Guess I better buckle down and figure this out!