Dear PoP – Tax Time

Photo by PoPville flickr user nairdaecartal

“Dear PoP,

You know of any accountants in the area who specialize in dealing with homeowners who rent out part of their home, or at minimum have experience with same? Seems like it’s about that time of year….”

For those that rent out parts of their home – who do you use tax time? Any other good recs besides the usual chains?

21 Comment

  • I’ve got a basement rental unit and have been using TurboTax online for the past four years. No problems with either D.C. or the feds.

  • I do it myself, use turbo tax and the IRS website. Works nicely. Though I am familiar with tax policy and the tax code, but by no means an expert.

    You should be able to save some money if you do it yourself.

  • Gelman Rosenberg & Freedman – a CPA firm in Bethesda, one block from the Red line – does a great job with my taxes/D.C. rental property.

  • Ditto the above. It’s a slightly more expensive version of the basic Turbo Tax, but it gets the job done, and for less than a tax professional.

    If it’s any encouragement, all you really are doing is calculating the net income from the rental unit — basically rent collected against the expenses (any utilities included with rent, repairs/improvements, and attributable insurance, taxes, mortgage interest, and depreciation … you can get more creative than that, but it begins to feel like you’re playing fast & loose with the IRS at some point), at the end of which you either show a loss or a gain for the rental that gets added in with the rest of your income. I’d save the accountant expense for when you sell the property and have to recalculate your basis.

    • To add to that, you can only take the portion of the rental expenses for the portion of the building that is used by the renter. So, if you use a bedroom and you rent out a bedroom and you share everything else, all expenses, including depreciation would be 50%. If your renter lives exclusively in teh basement, then the math gets more complicated, but would probably be 1/3 or 1/4.

      • Correct. In that situation, you have to come up with some %-figure of what part of the home is for the rental business and what part is personal use. That becomes the basis for how you calculate the depreciation expense and other stuff like “whole house” repairs (roof replacement, common yard landscaping, etc.). It’s not all that complicated, though — from my understanding of tax law, it just has to be a reasonable number, based on some justifiable connection to reality (i.e., % of home’s total square footage), not any complicated IRS formula.

        One of the small benefits of living in part/renting out part is utilities: for example, if you are going to get internet for yourself, you can just set up a wifi zone in the house, obligate yourself to provide internet under the lease, and then deduct half your monthly internet bill.

  • Are there any special tax considerations for this?

  • My accountant mentioned having to fill out a separate tax form for my rental units (in the house that I live in – basically rent out rooms with myself). He says its similar to a DC small business return. Anyone have advice on that or hear of something like that?

    • He’s right. DC taxes are more complicated, and you can’t just rely on Turbo Tax, especially if rental income is the only income on which you pay DC taxes. At the end of the day, however, they are not that hard.

    • Not sure exactly what you’re referring to, but if it’s a separate unit, you get a Schedule E. I’m guessing your accountant is referring to a Schedule C for the feds? And a D-30 for the District? I forget these kinds of things, which is one reason I have an accountant.

      You can always get an accountant for this year, and just use the returns he generates as a reference for next year when you do it yourself.

  • I’ve used H&R Block for years since I bought my home and started renting out rooms. They’ve done a great job.


    I’ve used them for over ten years, got a refund each time, definitely worth the fee.

  • I saw the folks above and assumed they were part of the wackos that hang out at the CH metro station and believe they are a lost tribe of israel or something.

  • I used an accountant for a few complicated years, as well as H&R Block – who charged me exorbitantly more than they had quoted. But the past 4 years Turbo Tax has seemed fine. Figuring a payment to an accountant would be 3-500.00, it seems a pretty small and reasonable risk. As long as I’m reporting all income honestly, I can’t see the IRS coming after me for possible small errors – and if they do, I doubt any adjustment, even with fines, would be more than what I would have paid an accountant.

  • For the first time I got an accountant as a result of my partial rental.

    I rent 2 rooms in my house.

    The accountant did an excellent job. He was able to depreciate my house as a split (residential/commercial) which saved me 600$.

    Paying 150$ for the services was a no-brainer as I doubt anyone else would have considered to split the depreciation on the house.

    Unnikumaran- Siv CPA
    1009 University Boulevard East
    Silver Spring MD 20903

  • Them crazy-eyed demons in the photo ain’t TOUCHIN’ my taxes.

  • TurboTax! TurboTax!

  • I rent out a few rooms in my home and it has taken me a few years to find a good tax preparer who knows what to do and doesn’t rip me off. I go to this family-run tax preparation operation in Hyattsville called Goetzingers. They’ve been great and I’ve been really happy with them.

    With apportionment and depreciation on the “rental” part of my home, the taxes get complicated, but I pay only about $200 to get them done right. I wouldn’t mess around with Turbo Tax…

  • I do NOT recommend trusting H&R Block. We tried them out a couple of years ago. I’m actually a tax attorney – not an accountant who does this every day, but certainly familiar with the system and capable of doing it myself. But we had a complicated tax year (filing in lots of states) and just didn’t want to do the paperwork ourselves.

    The guy at H&R Block was completely uneducated about tax returns. He was simply following prompts on a program similar to TurboTax. I imagine they do mass hiring at tax time and give them a quick training on how to ask simple questions and input data into the program to spit out a return. Worse yet, he wanted us to pay before he would even let us review the returns. We left and did it ourselves and got very different answers.

    I recommend just using TurboTax. If it’s complicated, you might want to visit an accountant, but if you sift through the IRS forms, you’ll be surprised how much information they have in their instructions. It might give you a headache, but the answers are usually there.

    Good luck!

  • Offer your tenants a discount for paying in cash..

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