A spare bedroom can be worth several hundred dollars a month, which is exactly why so many homeowners and even renters with permission are taking in a housemate or listing a room online in 2026. What almost nobody explains at the moment you say yes is that you have just become, in the eyes of the IRS, a small landlord, with a specific set of rules that can work strongly in your favor if you know them and cost you real money if you do not.

Three of those rules do most of the work: a little-known exception that can make short rental stints completely tax-free, the requirement to split your house expenses on paper, and a cap on deductions that applies precisely because you live there. Here is each one in plain English, sourced from the IRS’s own guidance.

The 14-day rule: the rare free lunch in the tax code

Start with the exception, because it is genuinely remarkable. Under the rule laid out in IRS Topic No. 415, if you use a dwelling as your residence and rent it out for fewer than 15 days during the year, you do not report the rental income at all. Not reduced, not deferred: not reported. The flip side is that you cannot deduct any rental expenses either, but for a homeowner who rents their place for one big local event or a couple of short stretches a year, this is tax-free income by design.

The count is days rented at fair price during the whole year, so 14 days works and 15 does not, and there is no dollar cap written into the rule. If you are anywhere near the line, your calendar records are the whole ballgame.

Day 15 and beyond: welcome to Schedule E

Rent the room for 15 days or more in a year and the income is taxable, reported on Schedule E with your Form 1040. Rental income is broader than rent checks, too: per the IRS’s rules on rental income and expenses, it includes advance rent when you receive it and any part of the security deposit you keep at the end of a tenancy.

The compensation is that real expenses become deductible against that income: a share of your mortgage interest, property taxes, utilities, insurance, repairs, and depreciation on the rented portion. For many room-renters, those deductions offset a large slice of the rent.

Splitting the house on paper

Because your tenant rents a room and not the whole house, you must divide expenses between rental use and personal use, and the IRS says any reasonable method works, with square footage and number-of-rooms being the standard two. If the rented bedroom is 150 square feet of a 1,500-square-foot house, 10 percent of the shared expenses, utilities, insurance, the roof repair, becomes a rental expense. Anything that benefits only the rented room, repainting it, fixing its window, is deductible in full; anything that benefits only your side of the house is not deductible at all.

Pick a method, write it down, and apply it consistently. The details and worked examples live in IRS Publication 527, Residential Rental Property, which has a section specifically on renting part of your property.

The cap nobody mentions: you live there

Here is the rule that surprises people at tax time. Because you use the home yourself for more than the greater of 14 days or 10 percent of the days it is rented, the IRS treats it as a dwelling used as a home, and Topic 415’s limit kicks in: your rental deductions generally cannot exceed your rental income. In other words, renting a room in the house you live in can zero out the tax on the rent, but it cannot manufacture a paper loss that shelters your paycheck. Disallowed expenses are not gone forever; they can generally carry forward to offset rental income in later years under the same rules.

Depreciation: the deduction with a memory

Depreciation on the rented portion of your home is a legitimate annual deduction, and Publication 527 walks through how to compute it. Take it knowingly, though: depreciation reduces your basis in the home, and when you eventually sell, the depreciation attributable to the rental use is generally taxed even if the rest of your gain qualifies for the home-sale exclusion. None of that makes renting the room a bad idea; it just means the deduction you take this year has a line item waiting for it in the year you sell. Keep a running record of what you claim.

The paperwork that keeps you safe

The record-keeping burden is honestly light if you start on day one: a calendar of rental days (decisive for the 14-day rule and the personal-use tests), a folder of receipts for anything you deduct, your allocation method in writing, and copies of leases or platform statements. If a platform or tenant pays you enough to trigger an information return, the IRS will have a copy of that form, so your Schedule E should tell the same story your records do.

Rent the room. For a lot of households it is the easiest four-figure annual income available. Just decide which side of the 15-day line you are on, split the expenses with a straight face, and remember that the house you live in can shelter the rent, not your salary.

This article was produced with AI assistance and reviewed by a human editor. Figures are linked to their primary sources; where a claim could not be verified from the public record, we say so.