Renting Your Bedroom Tax Rules

December 9th, 2023 at 8:16 AM

When you rent a bedroom or two or 20, you first examine Section 280A of the tax code to determine whether your bedroom rental is:

• tax-free because your rentals were for fewer than 15 days during the tax year.
• subject to section 280a vacation home rules.
• exempt from Section 280A.

When exempt from Section 280A, your bedroom rental faces four tax code sections:

1. Section 183, which requires a profit motive for you to claim any rental business tax deductions. Failing Section 183 requires the IRS to tax your bedroom income and give you no bedroom deductions other than mortgage interest and property taxes.
2. Section 469, which requires that you (or you and your spouse) materially participate in the property to claim any tax losses on the bedroom rental activity.
3. Section 1402, which requires you to report the activity on Schedule C and pay self-employment taxes on the net income when you provide services as part of the bedroom rentals.
4. Section 199A, which includes a tax deduction that you could claim if the bedroom rental is a business that qualifies.

Mark S. Fineberg, CPA