House Hacking by Renting Spare Rooms

You can house hack a single-family home by renting its spare bedrooms to housemates while you live there. Each rented room should meet your local code for a sleeping room, which under the model code most places adopt means at least 70 square feet and an escape window or door, and your city may cap how many unrelated people can share a house. Put the arrangement in a written room rental agreement, price the room from current local listings, and split shared costs such as mortgage interest by square footage or room count when you file taxes. For the strategy as a whole, see what is house hacking.

What makes a room a legal bedroom

The International Residential Code (IRC) is in use or adopted in 49 states and the District of Columbia, often with local changes, so confirm the edition and any amendments with your building department. Under the IRC:

• Size. A habitable room must have at least 70 square feet and measure at least 7 feet in every direction. Seattle's code guidance gives an example: a room 8 feet wide must be at least 8 feet 9 inches long, and parts of the room narrower than 7 feet do not count toward the 70.
• Emergency escape opening. Every sleeping room and every basement needs at least one operable window or door for escape. Under the 2021 IRC, the opening must have at least 5.7 square feet of clear open area (5 square feet at ground level), be at least 24 inches high and 20 inches wide when open, and have a sill no more than 44 inches above the floor.

A den with no window, or a basement room with a small high window, usually fails the escape rule. Ask the building department whether adding an egress window needs a permit, and price that work before you count the room's rent.

Local limits on unrelated occupants

Some zoning codes define "family" or "household" and cap how many unrelated people can live together. The U.S. Supreme Court upheld such a limit, a village ordinance allowing no more than two unrelated people per household, in Village of Belle Terre v. Boraas (1974). Some states now block these caps. Since July 1, 2024, Colorado's HB24-1007 bars cities and counties from limiting occupancy based on family relationship; they can still set limits based on building and fire codes, health standards, or affordable housing program rules.

To check your home, look up the definition of "family" or "household" in your city's zoning code and ask the zoning office whether renting rooms needs a rental license or registration. Homeowners association rules are separate and can restrict rentals on their own, so read the covenants too. Zoning and permits for house hacking explains how to find these rules.

What a room rental agreement covers

Put these terms in writing and have both of you sign before the renter moves in:

1. The space. The bedroom the renter controls, the shared areas they can use (kitchen, bathroom, laundry, parking), and any areas that are off limits.
2. Rent and deposit. Amount, due date, payment method, late fee, and the deposit. State law sets deposit limits and return deadlines.
3. Term. Month-to-month or a fixed term, and the written notice either side must give to end it.
4. Utilities and internet. Whether they are included or split, and how.
5. House rules. Guests and overnight stays, quiet hours, cleaning, food storage, smoking, and pets.
6. Entry. When you can enter the rented room and with how much notice.

How you can end the arrangement depends on state law. California has a narrow rule for an owner who rents to a single lodger: if you live in the home, rent to one person, and keep access to all areas and overall control, you can end a month-to-month (periodic) arrangement with written notice equal to the rent period (30 days if rent is monthly, and never less than 7 days). Once the notice period passes, you can ask the police or sheriff to remove the lodger as a trespasser, but not every department will, and if yours declines you need a court eviction. The rule does not apply once you have two or more lodgers. Without a rule like that, a room renter may have the same rights as any tenant, which means a court eviction.

Federal fair housing law exempts an owner who lives in a home with four or fewer units from most of its rental rules, but not from the ban on discriminatory ads and statements, and state or local laws may not have the exemption at all. Use the same written criteria for every applicant; see screening housemates and tenants.

Pricing a room from local listings

1. Collect 5 to 10 current room listings near you on rental sites and local housing boards.
2. Match on what changes the price: private or shared bathroom, furnished or not, utilities included or not, parking, and length of commute.
3. Check the ceiling. Look at what a studio or one-bedroom apartment nearby rents for. A room with a shared kitchen has to cost meaningfully less to compete.
4. Run it against your costs. If your monthly payment, including taxes and insurance, is $2,800 and two rooms rent for $900 each, the rooms cover $1,800 and you pay $1,000 plus your share of utilities and repairs.

Tell your insurance company before the first renter moves in, since a standard homeowners policy may not cover rented rooms. Insurance for house hackers covers the policy options.

How the rented rooms' share of expenses is figured for taxes

Room rent is taxable income, reported with your expenses on Schedule E. The IRS treats the rented part of your home as a separate rental property:

• Shared expenses that cover the whole house, such as mortgage interest, property tax, insurance, and utilities, are split between rental and personal use by any reasonable method. The two most common are square footage and number of rooms.
• Expenses only for the rented room, such as painting it, are fully deductible as rental expenses.
• Depreciation. Depreciation is a yearly deduction for the cost of a building as it wears out. Adjusted basis generally means your purchase price plus certain closing costs and improvements, minus reductions such as prior depreciation and insurance payments for property damage. You can depreciate the rented share of the house (not the land) over 27.5 years, starting from the lower of your adjusted basis or the fair market value when the room becomes a rental.
• Losses. If rental expenses for a dwelling unit you also use as a home are more than the rent, the excess cannot offset your other income; it carries forward to next year.

Example. The IRS's own example uses a 180-square-foot room in an 1,800-square-foot house, so 10% of shared costs are rental expenses: a $600 heating bill for the year produces a $60 rental deduction, and the other $540 is personal. With two rooms rented all year totaling 280 square feet in a 2,000-square-foot house, 14% of $18,000 in mortgage interest, or $2,520, would go on Schedule E.

Because the rented rooms are inside your home, you do not have to split the gain between rental and personal use when you sell. You do pay tax on gain equal to the depreciation you were allowed for rental use after May 6, 1997. If you rent rooms in your home for fewer than 15 days in a year, you do not report that rent, and you cannot deduct expenses for that rental use. House hacking tax benefits covers deductions and the sale rules, and house hacking with Airbnb covers renting rooms by the night.