depreciation when room rented 3 days of week

Suppose we rent a room, 25% of the square foot area of the whole house, for the entire year. The depreciation is 25% of 1/27.5 of the cost basis excluding land. Now say the room is only rented out 3 days a week; is the depreciation then 3/7 of the amount in the previous sentence?

Reply to
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Unless it is explicitley taken out of service 4 days each week, and made not available to be rented, I would assume it is available for rental the whole week.

Reply to
Arthur Kamlet

,

Only "day care facilities" have to limit such by amount of time used. Regardless, the whole amount will still fall under the Section 280A limitation, so it's likely that you will have no current year deduction (but do get to carry the unused amount forward).

Reply to
D. Stussy

What limitation are you talking about?

Reply to
removeps-groups

If you operate a day care business out of your home, your OIH expenses are limited to not only the portion of the home used, but the hours of operation as a day care business.

Reply to
Arthur Kamlet

Sounds like this would be subject to the same rules as a vacation home. You have two methods to pro-rate expenses (IRS and Tax Court) and expenses are limited to income.

Does the "room" include its own kitchen and bath facilities? If not, it's hard to see how the "rental" is not used by the landlord for personal use at least part of the time.

OK, suppose it *is* available for rental the other 4 days of the week. How many weeks or months or years would you give the landlord to find a tenant for these days before concluding that the landlord didn't have a profit motive (i.e. rental not-for-profit)? I'm assuming in fact that it will be almost impossible to find a tenant for just those other four days of the week. A landlord trying to make a profit would surely continue looking for a full-time tenant to replace the part-time one.

Unless running a lodging or boarding facility, which would be a Schedule C activity....

The limitations that apply to either "vacation" homes ("dwelling unit is used by the taxpayer during the taxable year as a residence") or not-for-profit rentals.

-Mark Bole

Reply to
Mark Bole

Wouldn't that be the other way around? If the room lacks those facilities, the tenant uses other space part of the time.

If the _only_ such facilities in the house are in that room, _then_ the landlord presumably uses it.

Seth

Reply to
Seth

And presumably the landlord uses the same rented "other space" the remainder of the time.

It comes down to facts and circumstances, but I think it would be a real stretch to claim this arrangement is a pure for-profit rental with no personal use.

-Mark Bole

Reply to
Mark Bole

So what? If you rent out 25%, and share 20%, and personal use 55%, then the 25% rented counts, and the 20% shared doesn't.

Seth

Reply to
Seth

Right, in this case the depreciation (which I guess is an expense) would be 3/7 of the normal total.

The landlord doesn't want to have a person around all the time. The person will often not be there on the weekends, and will just be there most of the weekdays. That was the landlord gets some space. The rent paid is about 3/7 of the normal monthly rent -- or a little bit more (because of the principle that when you buy in bulk you get a discount). I think these people are called "commuter renters". The room will not be rented out on other days, nor will the landlord use it for personal use, as the renter's stuff is there.

Try the following search in google

"commuter renter" site:sfbay.craigslist.org

It looks for HTML pages that have the word "commuter renter" in them and are on the website sfbay.craigslist.org, which is a classifieds listing website. The search results will change everyday.

Reply to
removeps-groups

That is, the renter has exclusive use of the room full time. The renter's use is limited in some ways (number of guests, number of hours/days of personal occupancy, etc.) but that doesn't affect the fact that the renter is the _sole_ user of the room full time, by contract.

Seth

Reply to
Seth

So what to your "so what". Are you claiming that this situation is not that of a "dwelling unit [...] used by the taxpayer during the taxable year as a residence"? (Recall that a dwelling unit includes sleeping, toilet, and cooking facilities.)

Apparently the answer to my first question is no, the room does not include its own kitchen and probably not even its own bathroom. The room is not a dwelling unit. Therefore, even if the not-for-profit rental rules don't apply, the vacation home rules do.

-Mark Bole

Reply to
Mark Bole

The

If you rent someone a room (which is not a dwelling unit) full time but only charge 3/7's of FMV rent, that is pretty much the definition of not for profit rental.

D. Stussy wrote: > Regardless, the whole amount will still fall under the Section 280A > limitation, so it's likely that you will have no current year deduction > (but do get to carry the unused amount forward).

Agreed. And the depreciation is carried forward separately and is still not allowed in excess of rental income in a future year. So to answer the original question, take depreciation based on 7 days per week but don't expect any significant tax benefit from it.

-Mark Bole

Reply to
Mark Bole

wouldn't FMV for such a commuter rental be 3/7's of the FMV of a full time rental?

Are you saying the IRS has the discretion to tell you how to rent your property?

Reply to
Wallace

No, never said that. But the IRS can certainly challenge whether you have a profit motive. If you do not have a profit motive, that is the worst combination: income is fully taxable on Form 1040 line 21, while expense deductions (other than mortgage interest and property tax) are limited to income and further limited by only being deductible subject to 2%-of-AGI limitation on Schedule A.

Really, what this whole thing boils down to is a roommate expense-sharing situation, and I would hazard to guess that in the vast majority of such situations, net taxable income ends up at zero. Or, as someone on another discussion board likes to say, you're rolling around an empty barrel.

-Mark Bole

Reply to
Mark Bole

FMV rent is for full-time usage.

The rental here is for full-time possession but only fractional-time usage. The FMV rent for "you may leave your possession here all the time, but only sleep here 3 nights a week" is not the same as FMV rent for "you may sleep here 7 nights a week".

Seth

Reply to
Seth

There is a profit motive. See, if you never rent your room you make $0. If you rent your room 3 days of the week and charges 3.5/7 on the normal monthly rent, you make a cool $5000 a year.

Roommate expense sharing makes sense to me when there's no mortgage. Then each person pays their half, or 75%/25%. But things are complicated when there is a mortgage. One person owns the house and has to make the mortgage principal, mortgage interest, and property tax payments -- and that one person will get the deductions on their Schedule A or E.

Reply to
removeps-groups

so what? It is the FMV for what is being offered.

Reply to
Wallace

That's my point. The fact that it's 3/7 of FMV for something else is irrelevant.

Seth

Reply to
Seth

more profit than there is loss.

Exactly. When there's no mortgage, there's unlikely to be tax implications from sharing expenses more or less equally.

But when there is a mortgage, the owner technically has taxable income to the extent the roommate pays rent.

Reply to
Stuart A. Bronstein

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