House Hacking - how do the rental taxes work?

[Cameron Seider]

I am 29 and looking to purchase my 1st home soon that I plan to house hack. I live just outside of DC and this is the only affordable way to buy a house in such an expensive area. I’m having a difficult time finding how rental taxes work while I’m living in the house. Will the rental income be taxed as regular income? Are their methods for reducing these taxes?

I would love to hear any thoughts / tips / wisdom! 

Thank you!

Cam

[Natalie Kolodij]

For depreciation you can only depreciation 100% rental space. 

In your example the renters 150 sq feet can be depreciated- if they also have their own bathroom that can be depreciated as well. 

So 15% of your building value gets deprecaited. 

For your overall bills- mortgage interest, utilities, property taxes ect- you can allocated based on a shared use area too. 

so 15% = business use + 50% of the  700 shared spaces as business use 

And that combined amount will be used for the operating expenses.