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It appears that Lev is not online, so if I may, I will assist you.
When generating any kind of income, you are allowed to deduct all "ordinary and necessary" expenses associated with the income generating activity. So, since you had to rent the apartment in order to have space to rent out to someone, you are entitled to allocate a portion of the rent to the $3,670 that you received.
A good method for allocating rent is based on square footage. If the entire apartment is 1,500 square feet, and you rent an 10 x 10 bedroom, you are subleasing 100 square feet of your 1,500 square feet unit. you could then take 1/15 of the $43,200 rent that you paid and allocate it to the income you received. This would be done on Schedule E. Now, if there were certain amenities in the apartment that your sub-lessor was not able to use, such as a Jacuzzi tub in the master bedroom or the like, you would have to adjust the rent allocation accordingly.
Does your sub-lessor pay any of the utilities? If not, you could also allocate part of the utilities to the income you received as well.
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Hi. Thank you for your response. I have a followup though. Using your explanation, I would generate a "loss" for my rental property which I don't own, which would make no sense and be unfair in a way. I think I realized the crucial piece. I didn't tell you the whole story. The room is about 140 sq ft and the apartment is about 800 sq ft. This equals 17.5% of the space. I only rented out this room for 25 days out of 365. That would equal 6.85% of the year. Shouldn't my math then be:
3600 (monthly rent) x 12 (months)= $43,200 (annual rent), times 6.85% (% of year occupied by airbnb renter) = $2,959.20 (total apt rent for time airbnb guests occupied the room), times 17.5% (% of apt used by room) = $517.86 deduction for 2012?
Please tell me if my logic holds. Thank you!!
Additionally, if my earlier thoughts from this morning were correct, on what line of the Schedule E (using Turbo Tax) do I place the $517.86 rental deduction? None of the line titles on the Schedule E seems to apply to a rental deduction such as this. Would it be line 19, "Other (list) ________"? Thank you.
Thanks. The other guy was great, but I missed you. ;)
Ok. What do you suggest I write on line 19? Do I say "personal rent expenses" and then write out the whole equation as I wrote it to you, or is that too detailed? I'm not sure Turbo Tax has space for a 3 line explanation. Thank you.
As I mentioned above - you may not deduct personal expenses - but may only deduct expenses related to the income generating rental activity.
As you prorated your expenses - that portion is not personal so writing "personal rent expenses" would not be correct.
I would write "portion of rent related to rental income"
If there is no space - just leave as above - and keep your calculations as supporting document with other tax related papers.