Financial Information Needed to File A Tax Return For Your Room Rental – Schedule E

Ok, You just decided to rent a room in your personal property. Great! If you are renting the property as a side income you will need to file tax returns. File the property and its financials at the Federal level. You may also need to file at the State/Local level as well.

In this post, we talk about everything you need to assemble to prepare for the tax return. Even if you are seeking the help from a CPA or other tax professional, this guide will be useful. The CPA needs this financial information to prepare your tax return.

If you are looking for specific information use this guide to click your way to the appropriate section. This article is targeted to those filers who are using Schedule E on their U.S Federal tax return.

Attached below is the spreadsheet that is used to assemble your income and expenses ahead of time.

Determine Ownership Percentage/Rental Use

Since the property you are renting is a room in a larger property, only a portion of the expenses that are tied to the whole property can be deducted. There are three calculations to determine what the exact portion is.

1. Ownership Percentage – the percentage of the home used for room rental.
2. Rental Percentage – the percentage of the time the room is rented (versus personal use).
3. Rental Use – the percentage of an expense attributable using Ownership Percentage and Rental Percentage.

The table below has all the numbers need to calculate each value.

Input Value	Amount
Total Home Square Footage	2400
Total Room Square Footage	480
Total Room Rental Days	100
Total Room Personal Days	100
Total Room Days Not Rented and Not Personal	165

Financials From Your Closing Documents

The first place you look for expenses for your new property is in your closing documents. There are many expenses in your closing documents. These will not be provided by anyone else because the companies/entities involved do not know about them.

These expenses appear in your closing document. The reason why? The closing attorney needs to apportion expenses between the seller and the buyer.

The table below provides an example of the types of expenses that may be in your closing documents.

Closing Cost	Sample Value
Property Taxes	$500
Water Utility	$100
Sewer Utility	$100
Association Fees	$200
Prepaid Mortgage Interest	$1,000
Total Expenses	$1,900

Property Depreciation

Starting off, you will depreciate the property. Only physical property can be depreciated, not the land. A good rule of thumb to start (for a common residential property) is that the property structures are 75% of the property value. The land is 25% of the value. Another resource is the breakdown given from your property tax assessment. If you are unsure about this breakdown, seek out a CPA that is familiar with your local area.

The form requires an amount referred as Property Basis. Property Basis is total cost for the property which includes more than just the purchase price. Property Basis includes many closing costs such as Title Fees and Attorney Fees.

Property Basis	$500,000
Land Value	$100,000
Structure Value (depreciate value)	$400,000

Vehicle Expenses

If you use a vehicle to travel to maintain your property, report those miles to obtain a travel deduction. The most common case is a personal vehicle that you use for your rental. In this situation, you will need to collect vehicle mileage/tolls. Then, file using the Standard Deduction. Calculate the deduction using a per-mile charge based upon mileage. Use the table below as your guide.

Vehicle Expense	Sample Value
Total Miles Driven	10,000
Total Rental Miles	600
Total Personal Miles	9,400
Tolls	60
Garage Rent	100

Property Income

Here’s the fun part! Earning income. Gather all the income you have from every source. The table below has sample information that may apply to your situation.

It is not common to pay taxes on your rentals. Third parties, such as marketplaces and realtors, will typically pay these taxes on your behalf. You may need to collect and remit taxes on your own rentals if your jurisdiction requires it.

Be sure to add all your commissions and any adjustments (rent refunds, extra guest payments, etc.).

Income Source	Gross Payment	Taxes	Commissions/Fees	Adjustments	Take Home
Airbnb	10,000		1,200	-200	8,600
Venmo	1,000	40			960
Paypal	2,000	80	60		1,860
Realtor/Manager	10,000		1,000		9,000
Marketplace Referral	2,000	80			1,920
Your Property Website	5,000	400	150		4,450
Personal Check	2,000	80			1,920
Total	32,000	680	2410	-200	28,710

Utilities

Collect all your utilities bills for the year. The table below contains common utilities that you will want to summarize.

Utility Cost	Sample Value
Cable TV	$1,000
Water Utility	$1,000
Sewer Utility	$1,000
Internet Service	$1,000
Total Utilities	$5,000

Direct Property Expenses

These are expenses that you incur in the property ownership. Collect all the expenses that quality for your property.

In this example, we include ‘Management Fees’ that are payments to property managers or marketplace referral apps. These payments would reflect fixed payments for property maintenance or fees to book/manage rentals. If you pay commissions by each rental, use the table above in the Income section.

Property Expense	Sample Value
Mortgage Interest (Form 1098)	10,000
Mortgage Points	2,000
Property Taxes	5,000
Fire Insurance	1,000
Flood Insurance	1,000
Association Fees	1,000
Garbage Collection	1,000
Management Fees	5,000
Total Property Expense	26,000

Property Maintenance Expenses

Next, collect all the expenses to maintain your property. For easy tabulation categorize into appropriate summaries: Cleaning and Maintenance, Repairs, and Supplies.

Category	Expense	Sample Value
Cleaning and Maintenance	Changeover Cleaning	900
	Power-wash Property	500
	Pest Control	500
	Weed Control	500
	HVAC inspection	300
Repairs	Water Heater	400
	Repair Deck	500
	Pave Driveway	300
Supplies	Paper Products	200
	Cleaning Products	100
	Linens	300
	Furnishings	2,000

Advertising Expenses

Lastly, tabulate all the costs to market your property.

Advertising Expense	Sample Value
Website Hosting	300
Online Ads	600
Offline Ads	500
Email Campaigns	300
Total	1,700

Summing It All Up

After gathering your expenses, use the attached spreadsheet to put them all together. This spreadsheet organizes all your financial information into a U.S. Federal IRS Schedule E. If you are filing your rental as a business, this format will work well for that purpose as well.

This spreadsheet will work for Microsoft Excel, Google Sheets, and many other programs.