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I rent out two rooms in my home. Currently we split the utility bill between 3 people, i.e. the utility bill is in my name, and I pay the utilities and then get reimbursed for the other two thirds by my renters/roommates.

What is the best way to deal with this from an income tax perspective? Do I need to report the reimbursement as rental income (in addition to the base per-month rental income I am receiving)? In that case, would I then be able to consider the 2/3 of the utility bill a business expense? Or am I okay handling this in an informal way, without recording the utilities as a business expense, and the reimbursement as income?

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It's the same result either way.

Say the bills are $600, and you are reimbursed $400. You'd be able to write off $400 as part of the utilities that are common expenses, but then claim the $400 as income.

I'd stick with that, and have contemporaneous records supporting all cash flow. You also can take 2/3 of any other maintenance costs that most homeowners can't. Like snow removal, lawn care, etc.

  • Thanks JoeTaxpayer, I'll stick with adding the utilities to my rental income and then writing off 2/3 of the utilities. It seems to be the most "correct" way of doing things. – theatraine Sep 1 '15 at 23:35
  • I have friends who have been doing this for a decade. The biggest advantage of having the renter pick up at least one of their own utility bills is that many banks want to see a bill in your name as evidence you reside at that address -- there are workarounds, but this is simpler. But their place was designed to be usable as two-family and the electric was already divided into separate meters and panels. – keshlam Sep 2 '15 at 1:05

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