10. Deduction of Rental Expenses
If you’re a homeowner and decide to rent out a fraction of your house, like a bedroom or your attic, you will indeed have to pay a tax on your rental income, but the expenses from the rental space are actually deductible.
Now, you may wonder what rental expenses could possibly mean… Well, general maintenance costs, insurance, real estate taxes, repair, supplies, or utilities can all be deductible. In fact, you can also deduct depreciation of the rental space, meaning if some pieces of furniture are broken, you can deduct them.
The best part? You don’t really need to itemize in order to deduct the expenses associated with rental space on Schedule A. You can easily claim them on Schedule E, Form 1040.
However, there’s a tricky part in all of this. It can be pretty hard to find out how much you can actually deduct if a cost covers the entire house. Take an electric bill for example. In this specific situation, you’ll have to divide the costs and allocate a small portion of them to your rental space.
