Renting Out a Room? Here's How to Deduct Rental Expenses

4 February 2026

So, you're thinking about renting out a room in your home? Whether it's to make extra cash, offset your mortgage, or simply fill an empty space, it's a great way to maximize your property's value. But here's the kicker—many homeowners forget about the tax benefits that come with renting out part of their home.

Did you know you can deduct certain rental expenses and potentially reduce your taxable rental income? Yep! The IRS allows you to write off a portion of your home expenses, but you have to follow certain rules. Don’t worry—I’m breaking it all down for you so you can maximize your deductions while staying on the right side of tax laws.

Understanding Rental Expenses

Before diving into deductions, let’s get clear on what exactly qualifies as a rental expense. Simply put, rental expenses are any ordinary and necessary costs you incur while renting out a room. These can include things like:

- Mortgage interest
- Property taxes
- Utilities
- Home repairs and maintenance
- Depreciation

However, because you’re only renting out part of your home (rather than the entire property), you can’t deduct 100% of these costs. Instead, you’ll need to calculate the portion that applies to your rental space.

How to Calculate the Deductible Portion

Since you're not renting out the entire house, you can only deduct rental expenses based on the percentage of the home that’s being rented. There are two common ways to figure this out:

1. Square Footage Method

This method is straightforward. Simply divide the rented space by the total square footage of your home. For example, if:

- Your total home is 2,000 square feet
- The rented room is 400 square feet

Your rental percentage would be:
(400 ÷ 2,000) × 100 = 20%

That means you can deduct 20% of eligible shared expenses, such as utilities, mortgage interest, and homeowner’s insurance.

2. Room Method

If every room in your house is roughly the same size, you can divide by the total number of rooms. Let’s say you have 10 rooms in your house, and you’re renting out one of them—that’s 10% of your home.

Most people find the square footage method more accurate, especially if rooms vary in size. But either way, the IRS allows both options, so choose what makes the most sense for your situation.

Commonly Deductible Rental Expenses

Okay, now that you know how to calculate the portion to deduct, let’s talk about the actual costs you can write off. Here’s a breakdown of some common deductible expenses:

1. Mortgage Interest & Property Taxes

If you have a mortgage, you already know that mortgage interest is deductible on your personal tax return. But when you rent out a room, you can also deduct a portion of that interest as a rental expense! The same goes for property taxes—just multiply the expense by your rental percentage.

2. Utilities & Internet

Since your tenant is using electricity, water, heating, and Wi-Fi, you can deduct a portion of those costs. If they pay for their own utilities, this doesn’t apply. However, if utilities are included in the rent, you can deduct a portion based on your rental percentage.

3. Repairs & Maintenance

Did you repaint the rented room or fix a leaky faucet in there? Those direct repairs can be fully deducted. On the other hand, general maintenance costs (like HVAC servicing or lawn care) can only be deducted based on the rental-use percentage.

4. Depreciation

Yep, you can actually deduct part of your home’s depreciation as a rental expense! Since your home naturally loses value over time, the IRS allows you to write off a portion of it based on your rental percentage. Keep in mind that when you sell, you might have to pay depreciation recapture tax, so consult a tax expert.

5. Homeowner’s & Rental Insurance

If you’re renting out a room, you might need additional landlord or rental property insurance. The good news? A portion of your standard homeowner’s insurance (plus any extra coverage you purchase) can be deducted.

6. Advertising & Listing Fees

Did you post your rental listing on Zillow or Airbnb? If you paid for advertising, listing fees, or background checks for tenants, consider that a deductible rental expense.

7. Legal & Professional Services

If you hired an accountant, attorney, or property manager to help with rental-related matters, their fees are deductible too! Keep track of invoices and payments—it all adds up when tax time rolls around.

Rental Expenses You Can't Deduct

Now, let’s address the things you cannot deduct. Not every home-related expense qualifies for a tax break. A few examples include:

- Improvements & renovations (e.g., adding a new deck or remodeling a kitchen)
- Personal expenses (like your Netflix subscription, unless it’s specifically used for the rental)
- Lost rental income from vacancies (unfortunately, the IRS doesn’t compensate for that)

However, note that home improvements may increase your home’s cost basis, which could still provide tax benefits when selling.

Reporting Rental Income & Expenses

Of course, if you’re claiming deductions, you need to properly report your rental income. The IRS requires you to file Schedule E (Form 1040) to report rental income and expenses. Be prepared to:

- List all rental income you’ve received
- Deduct expenses using the proportional method explained earlier
- Keep receipts and records in case of an audit

Pro tip: Open a separate bank account for rental income and expenses. This makes it easier to track what’s deductible.

Final Thoughts

Renting out a room can be a fantastic way to boost your income, but don’t overlook the tax benefits that come with it. By properly deducting allowable rental expenses, you might end up keeping more money in your pocket when tax season arrives.

Just remember to keep detailed records of your expenses, stay compliant with IRS rules, and when in doubt, consult a tax professional. You don’t want to miss out on potential savings—every dollar counts!