What a house hack is
House hacking means living in one part of a property while renting the rest — a duplex where you occupy one unit and rent the other, or a single-family home where you rent out spare bedrooms. The rental income offsets your housing cost, and you can depreciate the rented portion of the property under MACRS over 27.5 years.
How to calculate the rental percentage
For a multi-unit building with equally sized units, the rental percentage is simply the number of rented units divided by total units (e.g., 1 of 2 = 50%). For a single-family home with rented rooms, use the ratio of the rented rooms' square footage to the total square footage of the entire home. Apply that percentage to the building's depreciable cost (land excluded) to get the annual depreciation deduction.
Tax implications and limits
All expenses are split: the rental percentage applies to depreciation, mortgage interest (Schedule E portion), property insurance, and repairs. The remaining personal percentage follows homeowner rules — Schedule A for mortgage interest and taxes, no depreciation. When you eventually sell, only the rental portion is subject to depreciation recapture. A formal log of rental vs. personal days and a square-footage calculation provides the audit trail you would need to support the allocation.
Frequently asked questions
Can I depreciate my primary home if I rent out rooms?
Only the rented portion. Use the square footage of the rented space divided by total square footage, then apply that percentage to the building's cost basis.
What happens to depreciation when I stop house hacking?
Depreciation stops on the date you convert back to full personal use. Any deferred recapture on the rental portion applies if you later sell.
Sources
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.