Custom

3rd Quarter 2018

Tax Breaks for Home Sharing

Renting out your home when you aren't there, or even renting out a room through a home-sharing service, such as Airbnb, HomeAway, or VRBO, can be a great way to earn extra income. But you need to be aware of the tax rules — both for reporting your income and for taking deductions.

If you rent out your house for 14 or fewer days per year, but you live there the rest of the time, then the rental income is tax-free. You can still deduct mortgage interest and property taxes as you do for your principal home (if you itemize).

If you rent the house, or a room in the house, for more than 14 days per year, you must report all rental income when you file your income-tax return, but you'll also get to deduct rental expenses. You'll be able to deduct expenses incurred solely for the rental, such as cleaning and advertising fees. You can also deduct a percentage of certain expenses based on the portion of the time your house is rented vs. when you live there.

If you rent the house for half of the year and you live there for the other half of the year, for example, then you'll be able to deduct half of your mortgage interest, property taxes, insurance premiums, and utilities as rental expenses. If you just rent out a room in your house, you'll need to split up the deductions based on the portion of the home that was rented. You may also be able to deduct depreciation for the portion of the home that is used as a rental. The rules can be complicated. For more information, see the IRS's Sharing Economy Tax Center at www.irs.gov.

Return to top