Yes, you can deduct house expenses if you’re house hacking.
With that said, nothing in this post is tax advice and I’m not a tax professional. I would recommend you hire a CPA if you’re planning to house hack.
So, in this post – I’m going to give you some insight into why you should deduct housing expenses and the kinds of housing expenses you can deduct.
Table of Contents
Why you should deduct house expenses when house hacking
You should deduct house expenses when house hacking because if you’re collecting rental income (which you should be) – you’re running a business.
And since taxes are judged based on the profit of your business – you don’t want to inflate your profit by not deducting your expenses.
So, regardless if you’re house hacking a single-family home or house hacking a duplex, you’re going to want to deduct as many housing expenses as legally possible for your house hacking business.
Recommended Reading: House Hacking Guide
How many expenses you can deduct when house hacking
You will only be able to deduct housing expenses that are related to running your house hacking business.
For example, let’s say you paid for landscaping outside of your property to improve the curb appeal. You might think that you’re able to deduct the entire expense, but that’s not how it works. As I said above, you can only deduct expenses that are directly related to house hacking.
So, if you were house hacking a duplex – you would be able to deduct up to 50% of that expense.
The reason you would only be able to deduct up to 50% is that only 50% of your duplex generates rental income. Since you live in the other 50% of the duplex – you can’t deduct expenses for yourself.
Common tax deductions when house hacking
Depending on your unique situation, your tax deductions may or may not look similar to the list below. So make sure that you do your own research and talk to a professional.
Don’t forget, you can only deduct expenses that are from the rental unit in your house hack.
If you’re house hacking bedrooms instead of units, like the landscaping example in the previous section – you can only deduct a percentage of the expense that’s equal to the percentage of your property that’s used as a rental.
With that said, here are a few examples of common tax deductions when house hacking:
Deduct loan interest payments
If you financed your house hack and pay a mortgage like most people, a part of that mortgage payment is a tax deduction.
You can’t deduct the principal payments you make because they’re not actually an expense (you’re gaining equity that’s equal to your principal payment) but you can deduct the interest payments.
Deduct property taxes
Property taxes are typically also a part of your monthly mortgage. If you didn’t pay your property taxes, you wouldn’t be able to rent out any units or bedrooms because you’d lose your property.
That sounds like an expense (or portion of the expense) that’s directly related to the business portion of your house hack.
Deduct home insurance
If your mortgage includes property taxes, it’s likely to include home insurance as well.
This is another expense related to renting out units or bedrooms in a house hack
Deduct property depreciation
Depreciation basically means that something is worth less as time goes on.
Most people tend to look at homes as if they’ll exist forever but that’s not the case (especially not when taxes are concerned). Due to your property being used, the sun, water, air, and basically existing in life – your property is depreciating every day.
The IRS allows residential rental property to be appreciated over 27.5 years.
Deduct HOA fees
HOA fees are similar to property taxes – if you don’t pay them, you may get kicked out of your HOA community and lose your home (or be heavily fined).
Since these fees are necessary, you should be able to deduct a portion of this expense.
Deduct permit fees
Because you’re technically a landlord when house hacking, you may be required to purchase permits and inspections for your rental.
For example, at one of my properties – I’m required to purchase a rental permit every year that I rent the property.
Deduct property management fees
If you don’t self-manage your rental – you’re going to hire a property management company. And that property management company is going to charge you a fee for their services.
Since those services are used for the rental portion of your house hack – you can deduct the fees associated with them.
Deduct repairs and maintenance
Deducting repairs and maintenance is one of the most common tax deductions when house hacking.
If you’ve ever rented property or owned your own home – you know that things are always breaking and need to be fixed.
Thankfully, all repairs and maintenance on the rental unit of your house hack are deductible.
Deduct marketing expenses
When trying to find good renters, you’re going to have to market your property.
It’s not uncommon to spend money on photography, staging, online rental listing websites, and more.
Those expenses are directly related to your rental property and should be deductible as well.
Deduct legal fees
If you’re hiring a CPA or attorney, taking contractors to court, or even just getting a professional lease agreement made – those legal fees can be tax deductions.
So, when hiring a CPA – don’t forget to deduct their fees.
Actually, make sure to ask them if your situation allows you to deduct their fees in addition to other deductions. The answer is probably yes but you might as well ask them since you’re hiring them anyway.
Deduct cleaning fees
Anytime a tenant moves out of your rental unit, you’re going to want to get the unit ready for the next tenant.
This tenant turnover process typically includes cleaning the unit.
If you hire professional cleaners to clean the unit – that expense is deductible as well.
Deduct pest control fees
If you hire pest control services (or purchase DIY products) specifically for the rental portion of your house hack – that expense is deductible.
However, if you hire pest control services for the entire property – similar to the landscaping example I gave you earlier in the post – you can only deduct the portion of the expense that affects the rental unit.
Deduct lawn care and equipment
A portion of the lawn care is a tax-deductible expense.
However, although lawn equipment is a deductible expense as well – it can be more complicated to calculate how much is deductible and how to deduct it.
Depending on the useful life and price, you may have to depreciate some of the lawn care equipment you purchase (relative to what’s being used only for your rental unit).
See, things like that are why hiring a CPA is a smart idea. They should know exactly what equipment you have to depreciate and what equipment you can deduct 100% of in the same year.
Deduct tenant screening and background checks
Screening tenants is an important part of house hacking. Not only do you not want to rent your property to a horrible tenant – you don’t want to live next to one either.
Because this expense is directly related to the rental unit – you can deduct it for taxes.
Deduct utilities (if you pay them)
If you’re renting a unit and including utilities – you will be able to deduct a portion of the utilities for taxes.
Also, if your previous tenants moved out of the rental unit and you’re paying the utilities while looking for new tenants – that expense is directly related to your rental unit.
So it’s also deductible.
Final Thoughts
- You can definitely deduct housing expenses when house hacking
- You should deduct housing expenses when house hacking because those expenses were necessary in order to generate rental income
- Hiring a CPA is the easiest way to learn what expenses you can deduct when filing taxes
- Your individual situation and tax strategy will influence what deductions are available to you
