Renting out a room or unit in your home: the basics

Renting out a room, the other half of a duplex or a separate unit can help you pay for your home. But from your first ad you become a landlord, with duties. This guide is for a family renting out part of its home for the first time: it explains what fair housing law says, how to advertise and pick a tenant, what to put in the lease, how rent is reported to the IRS and what to ask your insurer.

Maximum size of the building you live in for the federal exemption (ads not covered)

4 families³

Rent out your home for less than that in a year and you do not report that rent

15 days¹¹

Typical monthly gross rent in the US (Census median)

$1,413

Homes that require the federal lead-based paint notice

Before 1978⁸

A room, a unit or the whole house: what changes

Renting a room inside your home is not the same as renting the other half of a duplex or a whole house. The fair housing rules, the way you split expenses and the lead notice all change.

Three ways to rent

You live there

A room in your home

• Federal law exempts it if the building has up to four families and you live there, except for the advertising rule.³
• You split home expenses by number of rooms or square footage.¹¹
• A single room does not require the lead notice unless a child under 6 lives there.⁸

You live next door

A separate unit or duplex

• The same federal exemption applies if the building has up to four units and you live in one.³
• You split expenses for the whole property, such as interest and taxes.¹¹
• If it was built before 1978, you give the lead pamphlet and disclosure.⁹

You live elsewhere

The whole house

• The federal exemption applies only if you own up to three houses and use no agent and no discriminatory ads.³
• You report rent and expenses, generally on Schedule E.¹²
• Ask about landlord insurance: it is mainly for long-term leases.¹³

In all three cases, no ad may show prohibited preferences.²

The Fair Housing Act applies to you too

HUD explains that housing discrimination is illegal in nearly all housing, including private housing. The Fair Housing ActFair Housing ActThe Fair Housing Act is the federal law that makes it illegal to refuse to sell or rent a dwelling, or to discriminate in its terms, because of race, color, religion, sex, familial status (having children), national origin or disability. It applies to landlords, real estate agents and managers, and also to banks and lenders when their practices make housing or credit unavailable for those reasons. National origin covers your language and the country you come from, regardless of immigration status. If you believe you were discriminated against, you can file a complaint with HUD at no cost; many states add protections.See the full definitionClose prohibits discrimination because of race, color, national originnational originNational origin is one of the characteristics the Fair Housing Act protects. According to the Department of Justice, national origin discrimination can be based on the country where you were born or where your ancestors came from. The law prohibits refusing to sell or rent you a home, setting different terms or publishing ads that state a preference based on your national origin. According to the CFPB, the Equal Credit Opportunity Act also prohibits lenders from discriminating against you because of your national origin when you apply for credit, such as a mortgage.See the full definitionClose, religion, sex, familial statusfamilial statusFamilial status is one of the characteristics the Fair Housing Act protects. The law defines it as having one or more children under 18 living with a parent, with another person who has legal custody of them or with someone that person designates in writing. It also protects anyone who is pregnant or is in the process of getting custody of a child. So, with some exceptions, such as certain housing for older persons, no one may refuse to rent or sell you a home, or impose special conditions, because you live with children.See the full definitionClose (having children or being pregnant) and disability.¹

In practice, the law makes it unlawful to refuse to rent or negotiate for one of those reasons, to set different conditions or to say a home is no longer available when it is. With a person with a disability, refusing a reasonable accommodation in your rules or services also counts as discrimination.²

Federal law has exemptions for small owners. These rules (except the advertising rule) do not apply to rooms or units in a building where up to four families live if the owner lives in one of them, or to a single-family house rented by an owner with up to three houses, if no real estate agent is used and no discriminatory ad is published.³

Your ad and choosing a tenant

The advertising rule always applies, even if you have an exemption.³ No notice, statement or ad may indicate a preference, limitation or discrimination because of race, color, religion, sex, disability, familial status or national origin.² HUD’s rule covers what you say out loud as well as applications, flyers and signs, and prohibits words, photos or symbols suggesting who the home is or is not for.⁴

The safest way to advertise is to describe the home, not the person: the size of the room, whether the kitchen is shared, the rent, the deposit and the date. In California, someone looking for a roommate in their own home may state a preference by sex if the kitchen, living room or bathroom will be shared; but no law allows advertising preferences about religion or whether the person has children.⁵

For tenant screeningtenant screening reportA tenant screening report is a report many landlords use to decide whether to rent to you and how much to charge for the security deposit. Specialty companies prepare it, and it can include your credit report, your rental history including eviction cases and lawsuits, employment verification, criminal history and a score or recommendation. It is not the same as a credit report. If a landlord denies you, or asks for a larger deposit or higher rent, because of the report, federal law requires the landlord to tell you, name the company and explain your right to a free copy and to dispute errors.See the full definitionClose, use the same requirements for everyone. If you deny an application because of something in a tenant or credit report, federal law requires you to give that person an adverse action noticeadverse action noticeAn adverse action notice is the notice you get when a company denies you credit or takes another action against you on your application or account. Under federal law, the lender must give you the main reasons or tell you how to ask for them. If the decision was based on a credit report or another consumer report, the company must also give you the score that was used, the name and contact information of the company that supplied the report, and explain your right to a free copy of that report and to dispute errors. The reporting company did not make the decision and cannot tell you why it was made.See the full definitionClose: in writing, orally or electronically, with the name, address and phone number of the company that provided the report, and their right to a free copy within 60 days and to dispute errors. Requiring a co-signer or a bigger deposit than others because of that report also counts as adverse action.⁶

How many people can live in the room? Occupancy rules are covered in the guide on sharing a home and occupancy limits.

The lease and the deposit

The Texas Attorney General says the most important source of the landlord-tenant relationship is the leaseleaseA lease, or rental agreement, is the contract in which the owner or landlord gives you the right to live in and use a property for a set period of time in exchange for payment, usually rent. While the lease lasts you have possession, but the landlord still owns the property. The lease says how much you pay and when, who handles maintenance and how the agreement can end. Your rights as a tenant are usually spelled out in the lease and in your state and local laws. Before complaining to the landlord, it helps to read the lease and make sure you are also following the rules you agreed to.See the full definitionClose, written or oral; that it should be read before signing and that any agreed change should be written into it and initialed by both sides.⁷ California’s guide recommends a written lease and requires one for a tenancy longer than a year. There, the landlord must hand over a signed copy within 15 days, put their name, address and phone number for legal notices in the agreement and, for tenancies starting on or after July 1, 2025, take photos of the unit at the start.⁵

Those move-in inspectionmove-in inspectionA move-in inspection is the walk-through of the home done before you move in to record in writing the condition of the unit and the equipment that comes with it. In public housing, the federal rule requires the agency and the tenant to inspect it together and sign a statement of its condition. Another inspection is done when you move out. The difference between the condition at move-in and at move-out is the basis for any charge against your deposit, if the damage goes beyond normal wear and tear. That record helps keep you from being charged for damage that was already there.See the full definitionClose photos record how the home looked at the start.⁵ In Texas, the Attorney General explains that the tenant must give a forwarding address and the landlord must return the security depositsecurity depositA security deposit is money you pay the landlord when you start renting as security that you will follow the lease: pay the rent and take care of the home. The money still belongs to you. The landlord holds it and, when you move out, must return it minus the charges the law allows, such as past-due rent or damage beyond normal wear and tear. You should not be charged for damage that was already there when you moved in. The maximum amount and the deadline to return it depend on your state's law and sometimes your city's.See the full definitionClose, minus damages, within 30 days of move-out, with an itemized list of deductions, and may not charge for normal wear and tear.⁷ Caps and deadlines change by state:

Deposit cap and return deadline, by state

State	Deposit limit	Time to return the deposit
Alabama	Up to 1 month of rent	60 calendar days
Arizona	Up to 1.5 months of rent	14 business days
Arkansas	Up to 2 months of rent	60 days
California	Up to 1 month of rent	21 days
Colorado	Up to 2 months of rent	1 day
Connecticut	Up to 2 months of rent	—
Delaware	Up to 1 month of rent	—
District of Columbia	Up to 1 month of rent	—
Florida	—	15 days
Georgia	Up to 2 months of rent	30 days
Hawaii	Up to 1 month of rent	14 days
Idaho	—	21 days
Illinois	—	45 days
Indiana	—	45 days
Iowa	Up to 2 months of rent	30 days
Kansas	Up to 1 month of rent	30 days
Louisiana	—	1 day
Maine	Up to 2 months of rent	—
Maryland	Up to 1 month of rent	45 days
Massachusetts	Up to 1 month of rent	30 days
Michigan	Up to 1.5 months of rent	30 days
Minnesota	—	21 days
Mississippi	—	45 days
Missouri	Up to 2 months of rent	30 days
Nebraska	Up to 1 month of rent	14 days
Nevada	Up to 3 months of rent	30 days
New Hampshire	Up to 1 month of rent	30 days
New Jersey	Up to 1.5 months of rent	30 days
New York	Up to 1 month of rent	14 days
North Carolina	—	30 days
North Dakota	Up to 1 month of rent	30 days
Ohio	—	30 days
Oklahoma	—	45 days
Oregon	—	31 days
Pennsylvania	Up to 2 months of rent	30 days
Rhode Island	Up to 1 month of rent	20 days
South Carolina	—	30 days
South Dakota	Up to 1 month of rent	21 days
Texas	—	30 days
Utah	—	30 days
Vermont	—	14 days
Virginia	Up to 2 months of rent	45 days
Washington	—	30 days
Wisconsin	—	21 days
Wyoming	—	30 days

These are each state's general rules; your city may have others.⁷ Tap your state for the exceptions. Source: each state's laws

The security deposits guide covers each state’s rules from the tenant’s side, and your lease explained walks through each clause.

If you rent a room in California, the official guide explains that a lodger is someone who lives in a room in a house where the owner lives, and that most lodgers have the same rights as tenants. With a single lodger, the owner can end the arrangement with written notice of the same length as any periodic tenancy, without a court case; but if the lodger disputes being a lodger, the matter can end up in court.⁵

Rent and your taxes

The IRS says that in most cases you must include in income everything you receive as rent. That also covers advance rent (in the year you receive it), your expenses that the tenant pays and the value of work or goods you accept instead of money.¹¹ It is generally reported on Schedule E of Form 1040; if you provide substantial services for the tenant’s convenience, the IRS points to Schedule C.¹² It becomes part of your yearly tax returntax returnA tax return is the yearly form you use to report your income to the IRS and figure the tax you owe, so you can pay what is due or get a refund. The federal return for individuals is Form 1040. In general you must file if your gross income is above the minimum the IRS sets for your filing status, or if you had a certain amount of net earnings from self-employment; even when you do not have to, filing can pay off. You need your SSN or ITIN, and those of everyone else on the return, plus documents such as your W-2s and 1099s.See the full definitionClose.

The deposit is not income when you receive it, if you plan to return it. If you keep part because the tenant did not live up to the lease, that part is income that year. And if the “deposit” is really the last month’s rent, it is advance rent.¹¹

You can also deduct expenses. The IRS mentions the ordinary and necessary expenses of managing and maintaining the property from the time you offer it for rent, and asks you to separate repairs from improvements and keep accurate records.¹¹ Expenses include depreciation (the wear on the property) and repairs that keep it in good condition.¹²

If you rent part of your home, you split whole-house expenses between the rented part and your part, as if they were two properties. The most common methods are number of rooms or square footage. Costs that belong only to the rented room, such as painting it or liability insurance for renting it, are fully rental expenses. In a duplex where you live in one half, you split the interest and taxes for the whole property.¹¹

How much to charge? For the IRS, a fair rental price is what someone unrelated to you would pay, and it is not fair if it is substantially less than rents for similar properties in your area.¹¹ Typical rent varies a lot from state to state:

Your state’s page in Places shows typical rent for your county. If you have questions about your case, the IRS has a free interactive tool, “Is my residential rental income taxable and/or are my expenses deductible?”, to check whether your rent is taxable and your expenses deductible.¹²

Insurance when you rent

This is the step people forget most. The Texas Department of Insurance warns that homeowners insurancehomeowners insuranceHomeowners insurance pays for losses and damage to your property if something unexpected happens, like a fire or a burglary, and usually includes liability coverage if someone is hurt at your home. Lenders require it as long as you have a mortgage, because the home is their collateral, and almost always collect it inside your monthly payment through the escrow account. The price depends on the location, the rebuilding cost, the deductible and your history. A standard policy does not cover floods or, in many states, earthquakes: those risks are insured separately.See the full definitionClose probably won’t cover the costs if someone gets hurt or causes damage when you rent your home or rooms short term, and that most homeowners policies won’t cover damage to a rental property or limit what they pay. Landlord insurance gives added protection and is mainly for long-term leases: ask whether to add it to your policy or buy a separate one.¹³

Liability coverage pays medical bills, lost wages and other costs for people you injure if you are legally responsible.¹⁴ Your policy also does not protect the tenant’s things: renters insurancerenters insuranceRenters insurance, also called tenants insurance, protects your belongings and protects you when you rent. The landlord's insurance covers the building, but not your furniture, clothes or electronics. It usually includes three coverages: your personal property, even if it is stolen away from home; additional living expenses if a covered loss forces you to move out for a while; and personal liability if someone is hurt in your home. A standard policy does not cover floods, which are insured separately. Some landlords require it.See the full definitionClose covers their belongings and does not pay to fix the house, which is the owner’s policy’s job.¹⁴¹⁵

California’s guide says many landlords require tenants to carry renters insurance, specifically liability coverage, and that each roommate needs a separate policy.⁵ The home insurance guide explains how to compare policies, and the renters insurance guide is useful for explaining it to your tenant.

For questions about your policy, the Texas Department of Insurance answers at 800-252-3439¹³ and California’s at 800-927-4357.¹⁵ In other states, look up your state insurance department.

Before you rent, step by step

From the first ad to handing over the keys

1. 1. Call your insurer

   Before you advertise

   Ask whether your policy covers a rented property or whether you need landlord insurance.¹³

2. 2. Write the ad

   Before you post it

   Describe the home and the terms, not the person. The advertising rule always applies.²

3. 3. Choose with the same requirements for everyone

   As applications arrive

   If you deny an application because of a report, give the adverse action notice.⁶

4. 4. Sign a written lease

   Before move-in

   Write in any changes you agree on and both initial them.⁷

5. 5. Give the lead notice if it applies

   Before signing

   If the home was built before 1978 and it is not a single room, hand over the EPA pamphlet.⁹

6. 6. Take the deposit and photos

   Move-in day

   Keep proof of the deposit and dated photos of the unit's condition.⁵

7. 7. Start your tax folder

   From the first month

   Keep rent receipts and expenses, and separate repairs from improvements.¹¹

If this is you

Common situations

You want to rent out a room to help with the bills

Rent is income, but you split home expenses by rooms or square footage, and liability insurance for the room is fully deductible.¹¹

You bought a duplex and live in one half

The federal exemption covers buildings of up to four units where you live, but not ads.³ You split interest and taxes for the whole property.¹¹

You rent to a relative

If it is not their main home or they do not pay a fair rental price, the IRS counts it as your personal use.¹¹

An applicant asks for an exception to your rules

Where the law applies, refusing a reasonable accommodation for a disability counts as discrimination.²

Costly mistakes

• Mistake: Writing "adults only" or "no kids" in the ad.

  Instead: Describe the home, not the person: the advertising rule applies even with an exemption.²

• Mistake: Renting without telling your insurer.

  Instead: Ask first: most homeowners policies do not fully cover a rented property.¹³

• Mistake: Spending the deposit as if it were rent.

  Instead: Keep it separate: it is not income as long as you plan to return it.¹¹

• Mistake: Deducting all home expenses when you only rent a room.

  Instead: Split shared expenses by rooms or square footage.¹¹

• Mistake: Denying an application because of a report without saying why.

  Instead: Give the adverse action notice with the report company's details.⁶

• Mistake: Making a handshake deal with no photos.

  Instead: Sign a written lease and take dated photos at the start.⁵

What to do this week

1. Call your insurer and ask, in writing, what your policy covers if you rent out a room or unit.¹³
2. Check the table in this guide for your state’s deposit cap and return deadline.⁷
3. Write an ad that describes the home, with no preferences about people.²
4. If the home was built before 1978, get the EPA lead pamphlet.⁹
5. Start a folder for rent receipts and expenses, and read IRS Publication 527 or use its interactive tool.¹²
6. If you have questions about your fair housing rights and duties, read the guide on housing discrimination or talk to a HUD-approved housing counselorHUD-approved housing counselorA HUD-approved housing counselor works at an agency HUD has approved to provide housing counseling: independent, expert advice customized to your situation about buying a home, renting, a missed mortgage payment, a foreclosure or credit problems. The agencies usually charge little or nothing; many serve in Spanish and offer the homebuyer education course several assistance programs require. They are not lenders or real estate agents and sell you nothing. Your county page lists the official agencies with phone numbers.See the full definitionClose.¹