What Can You Write Off If You Rent a Room in Your House?

If you rent out a bedroom in your home, you can write off the rental-use share of most household costs, plus any expense that exists only because of the tenant. That includes a portion of your mortgage interest, property taxes, homeowner’s insurance, utilities, general maintenance, and depreciation on the structure, along with 100% of costs tied solely to the rented room, such as advertising, a door lock, or furniture bought for the tenant.¹ The important limit: because you still live in the home, your total rental deductions generally cannot exceed the rent you collect.²

Expenses You Can Deduct in Full

Some costs benefit only the rented room. Those are fully deductible against your rental income without any allocation.¹ Typical examples:

Listing fees and advertising for the room
Painting or repairing the rented bedroom
Furniture, a mattress, or bedding bought for the tenant’s use
A lock installed on the tenant’s door

If you paid for it only because a tenant lives there, treat it as a direct expense.

Expenses You Split Between Personal and Rental Use

Most of what you’ll deduct is a shared household cost, and you can only write off the rental portion. Common indirect expenses include:

Mortgage interest
Property taxes
Homeowner’s insurance
Electricity, gas, water, internet, and trash collection
Lawn care, pest control, and cleaning of shared spaces
General repairs to the building

Mortgage interest and property taxes get a bonus: the personal-use share doesn’t disappear. If you itemize, that portion still comes off on Schedule A. Insurance and utilities don’t work that way. Only the rental share is deductible, and only against the rental.

How to Calculate the Rental Percentage

You need a defensible number for what counts as rental use. The IRS accepts two straightforward methods.³ The first is by square footage: divide the room’s area by the home’s total area. A 200-square-foot room in a 2,000-square-foot house is 10%. The second, useful when rooms are similar in size, is to divide one by the total number of rooms.

Don’t count hallways, closets, or shared bathrooms as rented space unless the tenant has exclusive use. Pick a method that produces a reasonable result, and stay consistent from year to year.

Repairs Versus Improvements

A repair keeps the property in working order. Patching drywall, fixing a leaky faucet, or replacing a cracked window all count, and you deduct the rental share in the year you pay.²

An improvement is different. It betters the property, restores something substantial, or adapts it to a new use. A new roof, an HVAC replacement, or a bathroom remodel all qualify. You can’t write those off immediately. The rental portion gets added to the property’s depreciable basis and recovered over time through depreciation.²

Plenty of projects sit between the two categories. When you can’t tell, err toward capitalizing as an improvement. Deducting an improvement all at once can draw penalties. Capitalizing a true repair only costs you the time value of money.

Depreciation on the Structure

Depreciation is often the biggest single write-off, and it doesn’t cost you cash in the year you claim it. Residential rental property depreciates over 27.5 years on a straight-line basis.⁴

Only the building depreciates, so first separate the land value from the structure’s value. If a $350,000 home sits on land worth $75,000, the depreciable basis is $275,000. Multiply by your rental-use percentage. At 10%, that’s $27,500. Divide by 27.5 years, and your annual depreciation deduction is $1,000. You report it on Form 4562, which carries to Schedule E.

One trap catches a lot of homeowners: you have to account for depreciation every year the room is available for rent, whether you actually claim it or not. When you sell, the IRS taxes the depreciation you were allowed to take, even if you skipped it on your returns. Skipping doesn’t save you anything. It just gives up the deduction.

Your Deductions Can’t Exceed Your Rental Income

This is the constraint that shapes almost every room-rental return. Because the home is still your personal residence, your rental deductions generally can’t create a loss that offsets your salary or other income.² When your rental expenses run past your rental income, deductions come off in a fixed order:

First, the rental portion of mortgage interest, property taxes, and any casualty losses.
Second, the rental portion of operating expenses like insurance, utilities, maintenance, and repairs.
Third, depreciation.

The first two categories can push you past your rental income and produce a loss. Depreciation cannot. Any depreciation you can’t use in the current year carries forward, subject to the same cap in future years.² For a single-room rental at a modest rate, expect part of your depreciation to sit in that carryforward.

If You Rent for 14 Days or Fewer

Rent the room for fewer than 15 days in the year and none of the rules above apply. You don’t report the income, and you don’t deduct any rental expenses.⁵ You can still take mortgage interest and property taxes on Schedule A if you itemize, the same as any homeowner. Cross into 15 days and every dollar of rent becomes taxable on Schedule E, and the deduction side of the ledger opens up.⁶

Renting to Family or Friends Below Market

If you rent the room to a relative or friend at less than fair market value, the IRS treats it as personal use, not a rental activity. You report the rent, but your deductions cannot exceed that income under any circumstances.² Mortgage interest and property taxes remain available on Schedule A if you itemize. The rest of the rental deductions effectively disappear. If you want to help someone out, understand that the discount you’re offering may cost you more in lost deductions than it saves them in rent.

When Your Rental Becomes a Business

Most room rentals belong on Schedule E, and the income isn’t subject to self-employment tax. Providing substantial services primarily for the tenant’s convenience changes that. Regular cleaning of the tenant’s room, daily meals, or laundry service pushes the arrangement onto Schedule C, where the income picks up roughly 15.3% in self-employment tax on top of income tax.⁶ A furnished room with shared kitchen access, by itself, doesn’t cross that line. Anything that looks like hospitality service might.

What Depreciation Costs You at Sale

The principal residence exclusion still applies to a home where you rented a room. You can exclude up to $250,000 of gain ($500,000 if married filing jointly) if you owned and lived in the home for at least two of the five years before the sale.⁷ For a room rental inside the same dwelling, the gain above the recaptured depreciation typically qualifies for the exclusion in full.⁸

The catch is depreciation recapture. Every dollar of depreciation you claimed, or were allowed to claim, gets taxed at a maximum rate of 25% when you sell.⁹ Ten years of $1,000 annual depreciation means up to $2,500 in recapture tax at closing, even if the rest of the gain is fully excluded. Keep clean cumulative records from the first year you rent the room. Reconstructing a decade of depreciation at sale is a headache you can avoid by writing it down as you go.

1
Internal Revenue Service. Topic No. 509, Business Use of Home
2
Internal Revenue Service. Publication 527, Residential Rental Property
3
Internal Revenue Service. Publication 587, Business Use of Your Home
4
Office of the Law Revision Counsel. 26 U.S. Code 168 – Accelerated Cost Recovery System
5
Internal Revenue Service. Topic No. 415, Renting Residential and Vacation Property
6
Internal Revenue Service. Topic No. 414, Rental Income and Expenses
7
Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence
8
Internal Revenue Service. Topic No. 701, Sale of Your Home
9
Office of the Law Revision Counsel. 26 USC 1 – Tax Imposed