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Tim KirkPro Member

Member since 2026 · 86 posts · 48 votes

1w

Are you planning to treat it as a business or are you just house hacking to save on living expenses?

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Chris Coulombe
OP
Homeowner · Mesa, AZ · Member since 2026 · 10 posts · 3 votes
1w
I guess the goal is to transition to more real estate, potentially more doors, I haven't decided or found what I am willing to try or dive into. So essentially the goal if possible is to rent out my personal room to someone, cash flow my current home if possible with HOA rules and either house hack the next one, buy a house to fix up and live in it, then refinance/ house hack, essentially whatever makes sense and keep going. Right now I stand to make extra income for the year from my roommates' rent and would like to find a way to make it so I am not paying a ton in taxes, maybe find a way to start a real estate business to include expenses. Supposedly a lot of people dont include roommate income but I see it as an opportunity to use that income to qualify for other property or different options.
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Aaron ZimmermanBusiness Member

Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes

1w

What was said by that accountant may not be entirely accurate. The portion that's a rental property is deductible. So if you have 3 units of equal size and live in 1, 2/3 would be deductible on schedule e and the remaining 1/3 would be either deductible on schedule a (property taxes, mortgage interest) or non-deductible, generally. If there's items specifically purchased for the rental, then the expenses may be 100% deductible.

I would also make sure you get the basis right for the year as it impacts Depreciation for all future years.

i can also send you a good bookkeeping spreadsheet as well. Please pm me if interested

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Chris Coulombe
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Homeowner · Mesa, AZ · Member since 2026 · 10 posts · 3 votes
1w
I live in a condo that is 1118 sq ft with 2 roommmates. There is a common living space with a living room and kitchen, stairs leading to a hallway, then each roommate has their own bathroom. Items include a new fridge, furniture for the rooms and living room, washer and dryer. Didnt know if depreciation, expenses, interest, I mean any of it can be deducted and different things taken into account because for example their rooms I don't have access to in my home. Other CPA saying since they are all items I use as well its hard to justify or use any as a writeoff. I live in AZ so maybe different laws or I didnt specify properly? I guess state laws might matter for state taxes but federal law would still apply? Alot of questions I know I just am in process of shopping different banks for business accounts or proper bookkeeping. Any resources or spreadsheets are appreciated
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Aaron ZimmermanBusiness Member
Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
5d
@Chris Coulombe from what I see, you'd have 2/3 as rental, which is deductible and then 1/3 as personal with property taxes and mortgage interest being deductible on schedule a itemized deductions for you. I'd look to connect with a real estate cpa
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Diana Khan

Attorney · 10451 Mill Run Cir #755 Owings Mills, MD 21117 · Member since 2024 · 302 posts · 113 votes

1w

Quote from @Chris Coulombe:

I am genuinely just getting started with the whole process, bought a house at end of May, talked to one accountant so far. I currently house hack and am trying to make decisions to set myself up going forward, very early on. He is saying I cant deduct any expenses of any kind essentially from the home, (upkeep, furniture, upgrades) because I live in the home myself. I am in a good position in a sense that I am going to make more from my W-2 as well as my roommate's income to help pay my mortgage, but I am worried about tax time. He emphasized starting up an LLC or something similar, but I don't want to get something started without knowing my direction. I just want to find a way so I am not paying thousands of dollars in taxes. I am trying to make decisions to help me going forward. I intend to set up a separate account to separate business expenses from personal, just didnt know if I should even shop which offers the best benefits for business accounts or sets up for higher LOC or have better reputations.

Any advise or personal experience would be greatly appreciated, sort of feel like I can go in 100s of different directions.

@Chris Coulombe! I've seen a lot of newer investors feel like they need to form an LLC right away, especially once rental income starts coming in. I would not rush into that just for the tax side. An LLC can be useful for the right reasons, but by itself it does not turn personal expenses into business expenses or create deductions that were not already allowed.

What I would do first is get the basics really clean. Keep good records of the rent you receive, have clear roommate or rental agreements, track expenses, and separate anything that is clearly for the rented rooms from things you use personally too. I would also check your HOA rules before building a bigger plan around renting more of the condo. Once you have that information organized, a CPA who works with real estate investors can give you a much clearer answer about what portion of the expenses may be deductible and how the property should be reported.

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Ashish AcharyaBusiness Member

CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes

6d

Chris, I'd slow down before forming an LLC just because you feel like you need to "do something" tax-wise.

The first thing I’d clarify is the comment that you can’t deduct anything because you live in the house yourself. That’s too broad for a house hack. If you’re renting part of your primary residence to roommates, the property is generally mixed-use for tax purposes. Expenses that relate specifically to the rented portion may be deductible, and shared expenses such as mortgage interest, property taxes, insurance, utilities, repairs, and depreciation generally need to be allocated between the personal and rental portions using a reasonable method.

Furniture or improvements used specifically for the rental area may also receive different treatment from purely personal expenses. So I’d get the allocation right before assuming everything is nondeductible.

I also wouldn't rush to put an owner-occupied house into an LLC. An LLC doesn't automatically create tax savings, and moving a primary residence into one can create lender, insurance, homestead, and administrative issues depending on your situation.

What I would do now is open a separate account for the rental activity, track roommate rent separately, save receipts, and document which expenses relate to the rental portion versus your personal space. That foundation will help far more than choosing a fancy business checking account.

The goal right now should be clean records and understanding the tax treatment of the house hack before adding complexity.

Feel free to DM me, I’d be happy to send over a few resources that might help you get the setup right from the beginning.

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Wale LawalBusiness Member

Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes

6d

@Chris Coulombe

I would hesitate when making decisions regarding your taxes and LLC based on only one accountant's recommendations because house-hacking may have various ways of being taxed and expensed according to its usage. Consult another accountant CPAs who work with rentals on a regular basis. Make sure that you keep a clean record of your rental income and expenses from the very first day and you will know for sure how much you can write off.

Good luck!

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Mason WeissBusiness Member

Realtor · Phoenix, AZ · Member since 2021 · 523 posts · 239 votes

6d

If you want to stick with a W2 job, you can look into acquiring a short term rental which can be an active investment allowing you to bonus depreciation your investment with a cost segregation study against your W2 income. This would provide a substantial tax deduction against your W2 income and allows you to stack doors and keep your capital.

[email protected]480-818-7745

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Aaron WeikleBusiness Member

Member since 2026 · 76 posts · 23 votes

6d

Your first accountant's blanket 'no deductions' stance is wrong for a house hack, but the nuance matters a lot here. With two roommates in a three bedroom condo, you're looking at a square footage allocation. If each bedroom is roughly equal, the rental portion is probably around 60 to 70% of the total space. That percentage applies to shared expenses: mortgage interest, property taxes, HOA dues, insurance, utilities, and depreciation on the structure. Those get split between Schedule E (rental portion) and Schedule A or nothing (your portion). Expenses tied exclusively to the rented rooms, like furniture you bought specifically for those rooms, can be 100% deductible. The fridge, washer/dryer, and shared living room furniture fall into a gray zone because you use them too. The IRS generally wants you to prorate those. That said, you can still depreciate them on Form 4562 using the rental-use percentage rather than throwing the whole deduction away. On the LLC question, I wouldn't form one for tax reasons on an owner-occupied property. There's no tax benefit, and you'd risk triggering your lender's due-on-sale clause, lose homestead protections in some states, and complicate insurance. The LLC question becomes more relevant when you buy a standalone rental. What actually helps you right now is clean records from day one. Open a separate checking account, run all rental income and directly related expenses through it, and document the square footage breakdown in writing. Get a lease with each roommate. That paper trail is what makes the deductions defensible if you're ever questioned. Find a CPA who works primarily with real estate investors because it seems like your current one does not.

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Gregory AcsPro Member

Lender · MD · Member since 2025 · 133 posts · 52 votes

5d

Congrats on getting started with your first house hack. You're asking these questions at the right time because the decisions you make now can make future investing much easier. I'd be cautious about forming an LLC or opening business accounts solely for tax reasons without having a clear investment plan. It's usually worth speaking with a CPA who regularly works with real estate investors so you understand what applies to your specific situation before making structural changes.

Since you're planning to keep investing, I'd also think about how today's decisions affect your future financing options and ability to scale. Setting things up with a long-term strategy in mind can save a lot of headaches later. If you'd like to talk through financing for your next purchase or how different loan options fit into your goals, I'd be happy to help.

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Patrick O'SullivanBusiness Member

Property Manager · Phoenix, AZ · Member since 2024 · 521 posts · 193 votes

5d

House hacking is mixed-use, so shared expenses like mortgage interest, property taxes, and utilities get split between personal and rental based on square footage, and anything bought specifically for the rented rooms can be deducted in full. Open a separate account for the rental activity now, keep a lease with each roommate, and document the square footage split in writing. That paper trail matters more than which bank you pick. Then find a CPA who actually works with house hacks regularly before making structural changes.

[email protected]480-795-7938

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Shiloh LundahlPro Member

Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes

5d

@Chris Coulombe don't listen to anyone above who stated that you should wait to start an LLC. Get an LLC right away. In Arizona it is super easy. Create an operating agreement specific to real estate, I have like 15 of them and I could share one with you and then you can just switch out the name for your LLC's name. This will give you the ability to buy properties with hard money loans. Most hard money lenders won't lend to a person, but they will lend to an LLC.

You are in Arizona which is like the Mecca of real estate investing. I can help connect you with a bunch of wholesalers here so you can start getting lots of deals coming to your email daily.

I host a free monthly investor meetup on the 4th Monday of the month in Mesa, Arizona. It's a great meeting with a great group. You are welcome to come. Send me a DM and I can send you the time and address.

The other reason for starting an LLC right away is because you can get business nines of credit with LLCs. There is a credit union in Mesa that will lend up to $100,000 to businesses that have been operating for a year. So you'll want to get your LLC open ASAP.

Also, not to brag, but to give a little context for the advice I am giving you. I have been investing in real estate in Arizona for 16 years and I have owned hundreds of properties and I've helped several other people get started on their real estate journey. But you don't need to take my advice, you are welcome to take the advice of others on this thread that you feel may suit you better.

Good luck you you.

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Bill HamptonBusiness Member

Accredited Investment Fiduciary, AIF®, Financial Planner, Tax Strategist, Real Estate Investor · Atlanta, GA · Member since 2012 · 2k+ posts · 977 votes

4d

@Chris Coulombe

Your accountant is wrong. Some of your expenses are business deductions, and some are personal deductions.

I recommend finding an accountant who specializes in real estate taxation. You want an accountant who is proactive instead of reactive and will work with you throughout the year, not just at tax time.

Good luck. Happy to answer any questions.

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Dan V.

Real Estate Consultant · Norfolk, VA · Member since 2017 · 342 posts · 200 votes

4d

LLC is mainly for liability/legal protection, not something that automatically creates tax deductions. At your stage, I wouldn't overcomplicate things trying to figure out the perfect entity or tax strategy before you even know what direction you're going.

What I would focus on right now is tracking everything properly so when tax season comes, you have more confidence that you're capturing whatever deductions you're actually entitled to.

I would have a dedicated bank account and preferably a credit card that you use for the rental/property activity. Then every month, download the transactions into Excel and add a column with a brief description of what each transaction was for — furniture, plumbing repair, mortgage payment, utilities, improvement, money you put into the account, etc. Keep the receipts and invoices as well.

Since you're house hacking and also living in the property, not everything will necessarily be 100% deductible. Some expenses may be personal, some may relate directly to the rented portion, and some shared expenses may need to be allocated between personal and rental use. Improvements and furniture can also have different tax treatment than regular repairs and expenses.

That's why I would track everything first rather than trying to decide on your own what is deductible and only keeping those transactions. At tax time, go through it with an accountant who understands rental real estate and determine the proper treatment.

As you learn, you'll get better at recognizing these things yourself. Then as you add properties and grow your portfolio, you can start looking at LLCs, more formal accounting systems, tax planning, and all the other good stuff.

For now, keep it simple, keep good records, and learn from your first property.

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New to Real Estate, just getting started.

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