Author Topic: Rent 'income' tax question  (Read 8317 times)

The Money Monk

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Rent 'income' tax question
« on: December 13, 2013, 10:04:56 AM »
I am the owner (mortgage, not outright) of the house that I and my girlfriend live in. If she pays me rent, I assume I have to count that as income for tax purposes? Would this change if she sent her portion to the lender directly, instead of giving it to me?

I assume not, since the mortgage is a loan in my name, paying it off would be viewed by the IRS as income to me, whether or not she gave the money to me or to the lender directly.

Whereas is I was renting with a lease in my name, if she sent her portion to the landlord directly would that be different? Same with utility payments?

Thanks for any input.

Cromacster

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Re: Rent 'income' tax question
« Reply #1 on: December 13, 2013, 10:37:35 AM »
Is she a true renter?  Ie do you have a lease agreement with her?  Or is she just paying you money to stay there?

If its official, there might be some tax implications, I don't know. 

If its not official, why does anyone (the gov'ment) have to know about it?

The Money Monk

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Re: Rent 'income' tax question
« Reply #2 on: December 13, 2013, 11:02:03 AM »
Is she a true renter?  Ie do you have a lease agreement with her?  Or is she just paying you money to stay there?

If its official, there might be some tax implications, I don't know. 

If its not official, why does anyone (the gov'ment) have to know about it?

it is not official. However I doubt that matters to the IRS as to whether it counts as income or not, which i am not sure.

IF it counts as income, I assume it would only matter if I got audited. I just don't know if it does or not.

jrs

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Re: Rent 'income' tax question
« Reply #3 on: December 13, 2013, 12:03:35 PM »
Ask her if she'd be willing to buy the groceries for the household instead of paying rent.

As for what's been paid as rent so far, if it were me, I would report it as income come tax day. 

The Money Monk

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Re: Rent 'income' tax question
« Reply #4 on: December 13, 2013, 12:08:11 PM »
Ask her if she'd be willing to buy the groceries for the household instead of paying rent.

As for what's been paid as rent so far, if it were me, I would report it as income come tax day.

Yeah I am going to. just to be safe.  Good idea about having her cover other stuff though. Maybe even just buy me publix gift cards in the appropriate amount lol. Although her 'rent' is over $300 and I don't spend nearly that much on groceries...


Debbie M

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Re: Rent 'income' tax question
« Reply #5 on: December 13, 2013, 04:01:03 PM »
My research on this issue (just reading IRS documents) made it clear that this counts as income.  Unless you are charging less than market rates (as people might if they were renting a room out to their mother-in-law super-cheap).  I don't know how much less than market rates it has to be for you not to have to declare it.

I decided that since I was charging only half of the PITI and none of the repairs, that this was less than market rates (even though in reality market rates may or may not be equal to PITI + upkeep + some profit).

Actually, really I decided that if it doesn't count as income while renting, it shouldn't count as income while buying because it's not fair.  The same way an old roommate of mine would occasionally decide not to stop at red lights if she had already had to stop at a lot of red lights on that trip already.  You risk fines and interest if you don't report it.  But as Maigahane said, the risk may not be high unless you're already an audit risk for some other reason such as for owning your own business and either reporting a loss without taking any deductions or taking suspicious deductions.

zinethstache

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Re: Rent 'income' tax question
« Reply #6 on: December 13, 2013, 05:28:58 PM »
I wonder if the "barter" system might be a better solution legally. You mention your food doesn't cost that much but perhaps she can pay other utilities on top of food? I am intrigued and will be reading other's thoughts and what you finally decide to do.

more4less

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Re: Rent 'income' tax question
« Reply #7 on: December 14, 2013, 12:32:17 PM »
For starters, I'm not tax professional. But your neat scheme with her paying for food and Internet bill will be still your income. Even if she cleans your house and picks up your shirts at dry cleaning  to cover her rent - still income (http://www.irs.gov/taxtopics/tc420.html).

On the other hand, if it's cash and it's not crazy amounts you can forget about it. These little things are impossible to enforce, so IRS won't even bother.

PS: or you can marry her and even get discount on your taxes :)
« Last Edit: December 14, 2013, 12:37:23 PM by more4less »

The Money Monk

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Re: Rent 'income' tax question
« Reply #8 on: December 15, 2013, 10:31:38 AM »


PS: or you can marry her and even get discount on your taxes :)


Mom?

wannabfrugal

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Re: Rent 'income' tax question
« Reply #9 on: December 15, 2013, 01:01:56 PM »