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I need to know what the tax rules are for family living under the same house that pay rent but combined amount does not exceed the monthly mortgage payment. No profit.

 
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Level 15

I need to know what the tax rules are for family living under the same house that pay rent but combined amount does not exceed the monthly mortgage payment. No profit.

If this is merely a cost sharing arrangement where the amount paid is below fair market rental, there would be no reportable income to you. If the “rent” amount is fair market value, or more, there is still some question as to whether you even have to report it, as it almost always comes out zero. Most people take the attitude that it is not income; it's just room mates/family sharing expenses and ignore it. Family, as opposed to unrelated roommates, makes that position stronger.

 

What you are NOT allowed to do, because it is your own home (you have "personal use") is claim a loss from this activity, to offset other income. Because of the "personal use rule", your deductions are limited to your income. Net effect ZERO.

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Level 15

I need to know what the tax rules are for family living under the same house that pay rent but combined amount does not exceed the monthly mortgage payment. No profit.

If this is merely a cost sharing arrangement where the amount paid is below fair market rental, there would be no reportable income to you. If the “rent” amount is fair market value, or more, there is still some question as to whether you even have to report it, as it almost always comes out zero. Most people take the attitude that it is not income; it's just room mates/family sharing expenses and ignore it. Family, as opposed to unrelated roommates, makes that position stronger.

 

What you are NOT allowed to do, because it is your own home (you have "personal use") is claim a loss from this activity, to offset other income. Because of the "personal use rule", your deductions are limited to your income. Net effect ZERO.

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Level 15

I need to know what the tax rules are for family living under the same house that pay rent but combined amount does not exceed the monthly mortgage payment. No profit.

Profit or loss doesn't matter. If your "intent" is to make money, then it's reportable income on SCH E. Just because the rent does not exceed the mortgage in no way means you're not making money. For starters, the entire mortgage payment is not deductible. Only the mortgage interest is.

But understand that it is common for rental property to always operate at a loss "ON PAPER" at tax time. When you figure in the depreication you are required to take by law and add that to the deductible expenses of mortgage interest, property taxes and insurance, it's rare for rental property to ever show a taxable profit. Add to that your other expenses (repairs, maintenance, etc.) and you're practically guaranteed to operate rental property at ever increasing losses with each passing year.

So the fact you're not making a profit does not mean you are not making money. WHile what you have may be a cost sharing arrangement on the federal taxes, that in no way means the state sees it that way if your state also taxes personal income.

 

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