If my home is jointly owned with my son and his partner lives with us paying a monthly rent, do I show rent as income and can I expense repairs and services?

You will show the rent as income and deduct expenses and repairs to the room that is rented.

is the rent at fair market value?

You do need to report the rent you receive as income. Expenses that are directly associated with renting the room, such as repairs and cleaning to the room your tenant is living in can be deducted in full. Other general expenses, such as property insurance and mortgage interest, should be allocated to the rental activity, normally based on the square footage of the room versus the whole house.

 

If you use the room for personal purposes more then 14 days or 10% of the time it is rented, whichever is greater, then you can only deduct expenses less than or equal to the rent income.

if it's below FMV the usage would be considered personal. the property would be rented for less than 15 days (atFMV) under the rules it would be treated as a personal residence. rental income and expenses would not be reported. if it's a qualified residence mortgage interest and real estate taxes would get reported on schedule A.

 

To all my colleagues, isn't this a little fishy?

 

@misssafety2010 

So you co-own a house with your son, and your son's partner (romantic, intimate partner, I assume) lives there and you want to charge rent.

 

Here's a simple answer.  The partner contributes money to the household expenses.  You don't report it as income and you don't deduct expenses.  Happens all the time.  You are all members of the same household sharing expenses.

 

Here's a complicated answer.  You charge 

rent

 and report the rent as 

income.  Can you really have rental income that is not personal use if the tenant is the romantic, intimate partner of the co-owner?  If you try to say yes, what is that separate room?  A bedroom?  That the romantic, intimate partner never sleeps in?  Or they really sleep in separate bedrooms?  

 

Then even if you charge fair market rent, you can still only deduct a small percentage of repairs, maintenance and utilities for the rest of the house based on the square footage of the rental (non-personal use) space.  And you create a depreciation recapture situation for when you sell the house.  

 

It doesn't seem entirely kosher (could you prove to an auditor that the rental use was entirely not personal?) and even if it is technically legal, it seems like a lot of trouble to go through for very little benefit.  

First thing I question is if this partner has a room that is for their exclusive use only. If it's your son's partner, I would expect that not to be the case. So there is no rent. It's just a sharing of expenses and nothing get reported anywhere on any tax return.

 

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 or domestic partner, 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 3 of you, then one-third 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.