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I purchased a home last July and began living there, while renting out a second bedroom in the property to a friend. I am now getting married in August, so the friend has moved out to his own place.

I've been trying to stay above-board in terms of the tax implications of getting paid rent from my roommate. So, I reported the rental income and then deducted things like mortgage interest, repair expenses, etc. You know the drill.

My question is this: Am I allowed to use repair expenses after my roommate moved out as tax deductions? If it helps, he moved out approximately June 1. I would have been happy to have him rent up until the weekend before the wedding (end of July), but logistics on his end made it much more convenient for him to move out when he did.

If I can make deductions, how long can I do so? For the rest of the year? Only until the time that I wouldn't have been renting the property, even if my roommate had staid that long (i.e., a week before the wedding)?

Thanks for the help.

  • I'd like to know about this but in the context of Ontario, Canada... – karancan Jun 27 '14 at 13:27
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    @karancan - If you wish, you should open a new question. A tag for this one should say US. – JoeTaxpayer Jun 27 '14 at 13:34
  • Are these repair expenses for wear & tear or unusual damage caused by your friend? Or were these needed repairs prior to, during, and after his rental stay? – NL7 Jun 27 '14 at 14:18
  • Some of both. For instance, I'm filling holes and repainting his room due to guitar mounts and other items that were put on the walls. But some of it is just standard deterioration on the house. For example, needing to replace the closing mechanisms on the screen door. My understanding was that any repair needed to keep the property in working order was justified, even if not caused by a tenant... (Incidentally, I'm also adding a deck, but I wouldn't deduct that - it's clearly an upgrade that increases property value, not a repair.) – John Chrysostom Jun 27 '14 at 14:33
  • are you planning on renting the extra room again? – mhoran_psprep Jun 27 '14 at 14:37
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How you handle the exit strategy depends on how you entered it.

I have a rental property, but it's a separate from my primary residence. So, deducting the mortgage interest, repairs, depreciation, etc., is likely cleaner for me than it will be in your case.

This article talks specifically to your situation. It discusses (as of 2012) various conditions, triggers, and calculations for when to claim income (or not), and when and to what extent you can deduct expenses (or not).

Presumably you'll stop renting your spare room more or less permanently after you get married. On the assumption that you did it right the first time -- which isn't my place to say, since I neither know, nor need to know! -- close out your rental activity as you should.

Bear in mind that if you deducted depreciation for your property or any of your appliances (again, assuming they were allowed in the first place) then you'll need to keep track of that until you sell the property. The depreciation reduces the basis you have in the property, which figures into the capital gain/loss you claim when you sell.

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