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Renting Out a Spare Room or Storage — What the IRS Treats as Reportable

By How Much+ Editorial Team · Published 2025-09-18 · Last updated: 2025-09-18 · 7 min read

Renting a spare room on Airbnb, parking on SpotHero, or storage on Neighbor sounds like easy passive income. The tax rules are more nuanced than people expect — including a famous 14-day exception.

Parts of this article were drafted with AI assistance and reviewed by a human editor. This is general educational content, not personalized advice.

Renting out a spare room, your driveway, or part of your basement on a platform like Airbnb, SpotHero, or Neighbor is one of the easiest ways to convert underused space into income. The tax treatment is generally straightforward — but there are a few specific rules that catch first-time renters off guard.

The 14-day rule (the "Augusta rule")

Under IRC §280A(g), if you rent your home for fewer than 15 days during the year, you don't have to report the rental income at all — and you can't deduct rental-related expenses either. This is sometimes called the "Augusta rule" because it originally let homeowners in Augusta, Georgia, rent out for the Masters Tournament tax-free.

It applies to your primary residence or a second home, as long as you also personally use the property for at least 14 days during the year. The 14-day rental cap is hard — at day 15, all of the rental income for the year becomes reportable, not just the income from day 15 onward.

For homeowners in cities hosting big events (Super Bowl, F1, conventions), this is a meaningful planning consideration. Always verify the current rule on the IRS website or with a tax professional before relying on it.

If you rent for 15 or more days

The income is reportable. Where it goes depends on the nature of the rental:

• Schedule E — Rental Real Estate: Standard treatment for longer-term rentals or short-term rentals where you provide minimal services. You report rental income, deduct expenses (utilities, supplies, depreciation, mortgage interest, insurance — all allocated to rental use), and the net is passive income.
• Schedule C — Business Income: If you provide "substantial services" (regular cleaning during a guest's stay, meals, concierge), the IRS may treat the activity as a hotel-like trade or business. That changes the rules — including subjecting the net income to self-employment tax.

Most casual Airbnb hosts who provide a clean room and basic amenities (no meals, cleaning between guests but not during) report on Schedule E. Heavy service hosts may belong on Schedule C. A CPA can map your specific operation to the right form.

Deductible expenses (allocated)

If you rent only part of your home, expenses must be allocated between personal and rental use. The most common methods:

• By square footage: Rented room is 200 sq ft of a 2,000 sq ft home → 10% of shared expenses are rental.
• By number of rooms: One room rented out of five total rooms → 20% allocation.

Common deductible expenses (for the rental-use percentage):

• Mortgage interest and property tax (the rental portion; the personal portion still goes on Schedule A if you itemize).
• Utilities, internet, insurance.
• Repairs and maintenance.
• Depreciation on the rental portion of the home (a multi-year deduction).
• Platform fees and cleaning fees.
• Supplies specifically for the rental (linens, toiletries).

The depreciation trap when you sell

Depreciation is required, not optional, on rental property. The IRS treats you as having taken it whether you actually deducted it or not, and when you sell the property they "recapture" it as ordinary income (up to 25%). This means renting out part of your home can affect your eventual sale tax bill in ways that aren't obvious at the start.

Renting out part of your primary residence can also reduce the IRC §121 capital-gains exclusion ($250,000 single / $500,000 married) when you sell. Talk to a CPA before you start renting if you're planning to sell within a few years.

Storage and parking

Renting a parking space (SpotHero, JustPark) or storage area (Neighbor, StoreAtMyHouse) generally falls under the same rental-income rules. The amounts are usually small enough that the 14-day exception doesn't apply (these are typically year-round rentals), so the income is reportable on Schedule E. Allocate expenses by the percentage of property used.

Don't forget local rules

Beyond federal taxes, many cities now require:

• Short-term rental permits or licenses (Airbnb / VRBO operations).
• Hotel/transient occupancy tax collection and remittance.
• HOA approval or zoning-code compliance.
• Updates to your homeowners insurance — standard policies often don't cover commercial rental activity.

Check your city's website and your insurance carrier before you list.

How How Much+ helps

Log every rental payout as Passive income. The Receipt Scanner captures cleaning, supply, and platform-fee receipts so your end-of-year expense totals are ready for Schedule E. Separate categories per platform make 1099 reconciliation straightforward.

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