How to Report Rental Income from a Live-in Relative?

We just bought a house and my sister is going to live with us for a time and give us $500 towards expenses each month. Once tax time comes, I am not sure how to claim this money that she gives us. Does anyone else have a similar situation, and how do you work it with taxes?


By Jackie R from Feasterville, PA

Anonymous Flag
January 25, 20110 found this helpful

I honestly don't think you have to declare this money as income from a 'roommate' who is sharing in the expenses such as electric, gas, water, cable, trash, possibly food, etc. and not paying rent. She'll simply be paying her share of expenses that another body in the house is bound to accrue.

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January 26, 20110 found this helpful

I agree with Deeli. Since she is only taking care of herself, and isn't really contributing to your care, or paying anything for you, why would you think you should claim what she does as taxable income for you? She's taking care of herself, not you. Good Luck. Be Happy.


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January 26, 20110 found this helpful

Hello Jackie. I respectfully disagree with "Deeli" and "PookaRina". If this friend is paying you (no matter what she is paying you for) I suspect the US tax code will consider it "income".

The IRS really doesn't care if it's a roommate only sharing utility bills. Chances are the IRS or state IRS will only recognize it as "income" (especially at the rate of $500.00 per month.) Please talk with a tax accountant for the most reliable information. I'd hate for something so innocent as helping out an adult friend or family member to come back and haunt you via tax audits! Take care.

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January 26, 20110 found this helpful

Talk to a tax person! You certainly don't want to get into trouble or do anything dishonest. You also don't want to give the IRS a penny more than you must. I know that legally someone can give you a gift of up to 12k and you don't have to pay tax on that. Perhaps this situation could be similar. Also, if it does honestly fall as "rent" there are deductions that you should be eligible for. So, speak with an expert or perhaps two!

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Anonymous Flag
January 26, 20110 found this helpful

I am going to add that, yes, if you're worried about it please do be safe and do talk to a CPA (unlike a regular accountant who is not required to yearly keep up on legal tax codes like a Certified Public Accountant has to). You can make an appointment for a free consultation with almost all CPA's.

I will tell you though that before I retired, and moved across the country for easy apartment living in a better climate, that I owned a business and a house and was not required to declare a roommate who contributed to their fair share of utilities, and overall general expenses. An extra body naturally incurs more expenses and their expenses are not income.

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January 27, 20110 found this helpful

Thanks everyone. I will contact a CPA to find out. I'd rather declare upfront if I need to know as opposed to risking being audited. I'm paranoid like that! I did know about the gift tax exemption, but not sure how that works, so I'll ask that as well. Thanks again!

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January 27, 20110 found this helpful

I vote for not claiming the money!

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January 29, 20110 found this helpful

I'm smiling. This is what I think is a successful thread! No one responded by claiming superior knowledge but everyone responded by offering a different insight. Too boot, the original questioner decided she needed to keep looking into the situation for her best interest. High fives and fists bumps for all of you. What a cordial, responsible, group we are! :-)

The U.S. tax code is so complex that even U.S. Senators and Representatives can't agree if it has more words than "War and Peace" or the "Holy Bible." (See this single reference: - for example.) If I were writing a thesis I'd be more detailed about references, but my point is that no single American really knows the extent of the Federal and State tax codes. Good Golly Miss or Mr. Molly, but my own small city (population around 50,000) ordinance book is as thick as one of my family bibles. Seriously, how is anyone able to know all the details of our over regulated so called democracy?

The best we can do to abide by tax laws is to hire a CPA or a tax attorney to give us some credibility for making good guesstimates. None-the-less, guesstimates don't necessarily hold up in a court of law so we each need to be personally aggressive in finding the best answers for our unique situations.

I do not believe that an adult friend or family member living in your home should result in you paying "income" on their contributions toward the household expenses, but I don't write the tax laws. While it is always good to get another point of view, a forum such as this is not a good source to proceed, legally. Unfortunately, we must consult with specialists to advise us how to best interpret the tax codes.

Know well I'm teetering on the see-saw of political discourse which is not encouraged or supported on this site, but as long as this site remains non political, the best we can do is share with each other our understanding of legal proceedings as we politely discuss such.

Again, it was great to read and follow through with such a civil discussion on our different takes of the U.S. and State tax codes on this thread. Glad to be on board as long as I'm not booted off for a thoughtful opinion!

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February 1, 20110 found this helpful

Thanks for your thoughts, Cindy. Of course I'm glad it didn't break down into any kind of heated discussion as well (as I have seen happen on this site before and many others as well). I was merely curious whether anyone had experience with the same situation, as I know a lot of families are living together nowadays with the economy tanking.

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