Case Study 1: Rental vs. Personal Use

Gloria rents one room in her house to a tenant. The total square footage of her house is 1,000 square feet. The rental room measures 10 feet by 10 feet (100 square feet, or 10% of the total house). She may deduct:

100% of any expenses that relate only to the rental portion of the house, such as repairs or upgrades to the rented room
10% of any qualified expense that benefits the entire house

Click here for an explanation.

Expenses that apply to just the rental part of a property should be reported in full on Schedule E, because they are direct business expenses. For example, the cost of installing a second phone line strictly for a tenant's use is deductible as a rental expense.

Schedules K-1 and Rental Income Workout

Special Allocations

Case Study 1: Rental vs. Personal Use