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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29558
Experience:  Taxes, Immigration, Labor Relations
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I just purchased my first home (with a downstairs inlaw). My

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I just purchased my first home (with a downstairs inlaw). My mother has retired and will be renting from me, what is the best way to handle this for tax purposes? I will be responsible for all repairs and maintenance

Lev :

Hi and welcome to our site!
Because your home has two separate units - these units will be treated for tax purposes as two different properties.
The best way would be to charge the full rental price - and report your rental income and rental expenses on schedule E - which is attached to your tax return -‎
On that schedule you will deduct your rental expenses and calculate your net rental income - that is added to your other taxable income.
Some examples of expenses that may be deducted from your total rental income are:
Depreciation – You begin to depreciate your rental property when you place it in service. You can recover some or all of your original acquisition cost and improvements by using Form 4562 (to report depreciation) beginning in the year your rental property is first placed in service, and beginning in any year you make improvements or add furnishings.
•Repairs – Repairs just keep your property in good working condition but do not add to the value of the property.
•Operating Expenses
•Uncollected rents – If you are a cash basis taxpayer, you cannot deduct uncollected rents as an expense because you have not included those rents in income.

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