Taxes on payments from family member for living in our house?

Question

My husband and I own a house. We built an addition on to the house for an elderly family member to move in so that we could help take care of her. The family member gives us a small amount ($300 a month) to offset utilities, repairs and other expenses in the house. She mostly buys her own groceries and pays her own other bills (medicine, etc.). If we could rent the addition to a non-related tenant we could probably get $1,200 - $1,400 a month for it. The size of the addition is about 25% of the total square footage of the house if that matters. The $300 she gives us basically covers the additional utilities and repairs/maintenance on her part of the house. It doesn't really put any dent into the cost of building the addition, or the payment on the home equity line we took to pay the builder, but that's ok because we hope to recover some of that later on when we eventually sell the house. We plan on deducting the interest on the home equity line on our income taxes (our total home debt for first mortgage and HELOC is below $250,000). Do we need to report the $300 payments as income?

Update:

We are probably overall in a net loss situation - the utilities (heat, electric, cable, phone, water) went up at least $200 due to the increased square footage and her own use since she moved in. My husband and I make more than $150,000 a year so I don't think we can deduct any loss.

Judy · Accepted Answer

No, the money is a sharing of expenses, not rental income.  You don't report it.

Bobbie · Answer

If the family member is just giving you a gift amount each month of 300 you would not have any taxable income to be reported on your 1040 tax form.
If it is rental income to a related taxpayer at less than fair rental value then the amount is reported on line 21 other income of the 1040 federal income tax return and the related rental expenses would be a part of your miscellaneous itemized deductions on the schedule A of your 1040 tax form when it is correctly completed.
Hope that you find the above enclosed information useful.

falsi fiable · Answer

You need to file Schedule E (Rents and Royalties) and claim the rent as income, offset by repairs and depreciation. TurboTax Premier can help with the depreciation calculations, which can get quite complicated.

Slickterp · Answer

As she is a family member and is only paying to offset utilities, etc, no you don't.

tro · Answer

when you are renting to a family member under the market value of the rental, you are not allowed to claim the expenses, but you do claim the income

Anonymous · Answer

OFFER TO BUY THE HOUSE. if you can afford their rent, you can afford to buy the house. get the option to buy.

Trending News

Taxes on payments from family member for living in our house?

6 Answers