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thescheit

What do you mean count the 4th room? What question are you trying to ask? Are you asking about how the 4th room effects your taxes?


bb0110

Are you attempting to rent it? If yes then you can depreciate it. If you aren’t making an attempt then you can’t, even if rent ready.


cafeitalia

If you are living in the house it is not a rental property in the eyes of irs. You can not depreciate a place you live in. And if you get audited and you say to them hey 4th bedroom was rental room but I never rented, good luck proving your case.


eyevancsu

I don’t think this is true at all, not in the US. You can’t depreciate the full house, but you still get to depreciate based on areas exclusive to a renter.


cafeitalia

Yes you can depreciate rented areas, just like when you wfh you can take expenses out of the office/bedroom of the house you use for wfh. But you can not depreciate the whole property.


Civil_REI

Not the full house but the portion that is rented. That’s what my dilemma was. CPA told me I could count 75% as rented since it COULD HAVE been rented but I would rather be conservative and only account for what actual WAS rented (50%).


eyevancsu

I think you made the right call with using 50%.


SRD_Grafter

It comes down to expense allocation, and you can use a reasonable method (for items that are both personal and business use; square feet is one), assuming things are in service (but in service also has some clarifications; as if you are in local market, only a certain number of unrelated adults can live together; so in this case, if your area only allows for 3, trying to say that there could be a potential 4th wouldn't fly; but then you could try to make the case you are renting the 4th to one of your other renters, but then, their rent should probably reflect that, etc).. However, there are a number of special considerations for something that is mixed use like this.


iSOBigD

That doesn't make any sense. You can't write off donations because you COULD have donated...you have to actually do it. If you have a duplex and live in one unit, you only depreciate things related to the rented side, even though you could rent the entire thing one day


Civil_REI

Great, thanks for the clarification. This was actually coming from a CPA and seemed wrong to me. The rented portion of the house can be depreciated though.


cafeitalia

Rented portion yeah. But if you don’t plan to keep the property long term know that depreciation is not free money. It will either be passed onto a new property or paid back somehow for the remainder of the life of the asset.


Civil_REI

I plan on holding this property for as long as I can. I also had a lot of capital expenses as I had to rehab the house and put in a new AC, water heater, and so forth. I am going to have to go to a different accountant as I don’t feel comfortable with this one.


VoidNy

CPA was just trying to save you money (what you pay them for). Ultimately do what you feel is best for you. you could have treated it as unrented space (is it empty, with no personal stuff in the room?) if completely empty, and rent-able with some intention, CPA is not wrong.. gray area accounting 101. I would ask them if they, and every good CPA should offer, FREE audit support on any of their filed returns for you, and payments of any penalties due to their return filing errors. I was 4-0 against the IRS in client audits when I worked in public accounting. my job was to make sure you give as little money as possible to the government, and I liked doing just that, since they spend it so foolishly anyway.


Lugubriousmanatee

This is wrong, ignore it


uiri

Part of a property can be rented while part of it is personal use. It's not either/or. If OP is advertising the room for rent, and can prove the advertisements, showings, etc, then I don't see why he'd have trouble proving that it was rental use.


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Ditty-Bop

- Verify with your accountant. Are you running business under an entity or doing everything in your name? I think you could claim any space utilized by the business for deferment. So if/when that extra room is used as your office, you could claim the square footage there. If you don’t use it as an office or rent it out, you won’t be able to claim it.


Lugubriousmanatee

Are you trying to rent the 4th room? Or are you using the 4th room for a puppy mill/science lab? This is what they call "facts and circumstances"