How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Megan C Your Own Question
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16547
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
23669918
Type Your Tax Question Here...
Megan C is online now
A new question is answered every 9 seconds

If I own an apartment with a mortgage and I have a flatmate

This answer was rated:

If I own an apartment with a mortgage and I have a flatmate who pays me rent for their room, do I pay tax on the rent minus the mortgage payments? If the mortgage payments are larger do I pay nothing?

Thanks!

MyVirtualCPA :

Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

MyVirtualCPA :

How are you today?

MyVirtualCPA :

In your rental scenario, you are not operating with a profit motive - you're operating to offset your monthly expenses

MyVirtualCPA :

You will claim the rent as income, but you can deduct any expense related to that rental - the portion of your insurance that is attributable to the rental, the portion of the utilities that is attributable to the rental, any repairs attributable to the rental

Customer:

Hi, I am renting out two spare rooms to help pay for the mortgage, is that what you mean?

MyVirtualCPA :

Plus, depreciation on the part of your house that is rented out.

MyVirtualCPA :

However, you can only deduct up to the amount of your rent.

Customer:

and the mortgage interest?

MyVirtualCPA :

Yes, that is what I mean - in response to your response

MyVirtualCPA :

Yes, but you will probably be deducting the mortgage interest anyways on your house

Customer:

you mean I will already be deducting mortgage interest from my annual income, regardless of the rentors, so what is left to offset against the rent are these other expenses?

MyVirtualCPA :

yes, those other expenses - insurance, repairs, depreciation, utilities, etc

MyVirtualCPA :

but, you can only deduct expenses up to the amount of your rent

Customer:

and so all of the escrow payments would be included in that?

MyVirtualCPA :

Yes, that is correct

Customer:

if I was going to but another rental is it easier to do this through a company structure then?

MyVirtualCPA :

No you will not do this through a company structure. It will make your tax reporting more complex, and this isn't a business

MyVirtualCPA :

Oh...if you buy another rental. I'm sorry

Customer:

that's right

MyVirtualCPA :

Yes, if you buy another rental - you don't have to have a company structure. You can report the income and expenses on schedule E of your tax return

Customer:

ok, thank you

Megan C and 2 other Tax Specialists are ready to help you
Thanks, Max for your positive rating. Please come back and visit MyVirtualCPA for any of your tax, finance, or social security needs. It was a pleasure working with you today.

Related Tax Questions