Cost Sharing an Apartment (Tax Implications?)

4 Replies

I have a spare room in a 2BD/2BA apartment. I rent the apartment unit and I am looking to rent out the extra room. I was going to use the two rooms for myself, but decided to rent out the spare room. What are the tax implications, if any, of renting out the spare room? All the posts I have seen are for house hacking scenarios when the owner is renting out a unit/room that he or she owns.

Thank you for your advice!

@Calvin Kwon

There's a difference between a cost sharing arrangement and subleasing, and different tax treatments follow.

It's unclear from your OP what (1) arrangement you have with the other individual, if any, and (2) the economic reality of the transaction (e.g. what it is in substance).

I think you should work with your tax professional to consider your goals and the tax consequences of each path, then structure the situation advantageously.  Best of luck.

This is an example of a tax planning opportunity in which a competent tax professional can shine.

Thank you very much @Eamonn McElroy . After reading your post about "arrangement" and "substance" I realized it may not be as straight forward as I thought. I will get an advice from a tax professional. If you have any colleagues in Northern Virginia you recommend, please do let me know!