Taxable income when House Hacking

[Stan Soulen]

Hello BP, After listening to podcast 196 with CPA Brandon Hall, I am questioning whether or not I'm most efficiently House Hacking. I currently rent out half of my property. I was told that as long as I was living there, it wasn't considered a rental property and the rents collected don't have to be reported. What are the benefits of reporting this extra income if it is just going to be taxed? Is it worth the write offs if I'm renting out the majority of my property for the depreciation? I don't see how those deductions would equal the amount that the government would take out. Thanks in advance for helping me think through and understand this.

[Brandon Hall]

I had a client who thought the same until he got audited.

If you receive income from any source you must report it. If you are renting out rooms in your home, your home will be split between personal and investment use. I recommend that you amend prior year returns in which you did not report this income. Trust me, you don't want to wait until it's too  late.