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mjquito
Returning Member

I own a house. I can't rent where I live, but I can have roommates. They pay me a fixed amount every month. Should I count this as rental income?

I live in a single family house. According to the city code, I can't rent rooms, like I can't do a boarding house. However, what I can do is to live in the house and get roommates, and everyone in the house will be treated as one household or one family, which does not violate the city code.

 

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2 Replies
HelenC12
Expert Alumni

I own a house. I can't rent where I live, but I can have roommates. They pay me a fixed amount every month. Should I count this as rental income?

No matter what your city code states, for income tax purposes:

  1. You are not required to report rental income if you're all roommates and you share housing expenses.
  2. On the other hand, the IRS requires you to report rental income and expense if you are renting your home to make a profit. See Where do I enter income and expenses from a rental property?

 

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Hal_Al
Level 15

I own a house. I can't rent where I live, but I can have roommates. They pay me a fixed amount every month. Should I count this as rental income?

Q. Should I count this as rental income?

A. Simple answer: No.

 

You'll get various opinions, but that's the simple answer.  

 

Roommate  rental

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 sharing expenses and ignore it. Family, as opposed to unrelated roommates, makes that position stronger.

 

Here’s what you may be required to do:

Report the income (enter at Rents & Royalties/Income & expenses from Rental Properties); and then deduct the expenses on schedule E. If the room mate has full run of the house, and there's just the 2 of you, then half your expenses are deductible (mortgage interest, property taxes, insurance, utilities, repairs, and depreciation [if needed}). Your net income will usually be less than zero.

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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