I own a home in Michigan and work full-time. My retired disabled mother (not a "dependent") moved in last year and informally "rents" a room from me in my personal home for $300 month cash (well below fair market value for renting a room) to help with bills after we both hit some hard times. She helps me financially; I help her get around. I am not making a profit in this like a landlord would.
She is concerned that by not filing it as rent/income on my part that I could be prosecuted for not reporting income, and/or that by not filing it as rent on her part, her disability benefits (tied to her tax return) will be cut for not having a rent to pay. It's screwy. TurboTax Premier says it does not qualify as rental income and to report it under Misc Income, where I am instantly hit with a tax bill.
Personally, I do not consider it income. I am not renting for profit nor am I pocketing the money. I'd say it's closer to being a monthly gift but then that doesn't show up on her return as a rent. What is the legally, ethically correct way to file this?
