I own my condo, and have a lodger renting one room. Last year, I filled out Schedule E and put the rent in there. I allocated my expenses (including mortgage interest) across my Schedule A and Schedule E on a 70/30 basis, respectively (70% being my use of the condo, and 30% being the tenant's use). This year, in looking over Publication 936, I happened to notice the following: RENTING OUT PART OF HOME
If you rent out part of a qualified home to another person (tenant), you can treat the rented part as being used by you for residential living only if all of the following conditions apply.
-- The rented part of your home is used by the tenant primarily for residential living. (True in my case)
-- The rented part of your home is not a self-contained residential unit having separate sleeping, cooking, and toilet facilities. (True in my case)
-- You do not rent (directly or by sublease) the same or different parts of your home to more than two tenants at any time during the tax year. If two persons (and dependents of either) share the same sleeping quarters, they are treated as one tenant. (True in my case) ______________________________________________________
Does this mean that I can report the full allowable personal mortgage interest (i.e. Home Acquisition Debt + $100,000 Home Equity maximum) on my Schedule A, thus leaving all of it (even the lodger's percentage- of-use allocation) entirely out of my Schedule E? If so, can I continue reporting the lodger's rent and 30% of non- interest expenses (repairs, maintenance, HOA dues, etc) on Schedule E? The reason I ask is that I would like to "free up" line 12 of Schedule E for use in STRICTLY reporting mortgage interest associated with mortgage funds which I recently used to purchase a rental (investment) property. This is advantageous because these funds exceed the deductibility limits (Home Acquisition Debt + $100,00 Home Equity maximum) allowed under Schedule A. Trying to use line 12 on Schedule E for both the lodger's portion of my mortgage interest and the rental (investment) property's portion of my mortgage interest could get confusing and messy (two recipes for an IRS audit, I suspect). There are some "double-dipping" dangers I'd rather not have to contend with in attempting to undertake the necessary calculations. (In fact, I get a headache just thinking about it! lol ) Thanks, guys! Hope the foregoing did not give you a migraine. :-) William