Our adult disabled child receives SSI and uses some of it to pay us rent to live in our home. Do we owe taxes on the rent that she pays us?

[weinrauch]

She receives the maximum amount of SSI for a person living at home. We charge her the fair market value of what it would cost to rent a room in our home. We do not profit from the rent she pays us, as her share of our actual mortgage payment would be much higher. In addition to the rent, she pays us a monthly amount toward food and utilities. Is the rent she pays us considered taxable income, or is she simply sharing living expenses with us? There is a lot of conflicting information about this topic online and I can't find a specific reference to it in the IRS code.

[Bsch4477]

You are just cost sharing which doesn’t affect your tax return. 

[Hal_Al]

She is  simply sharing living expenses with you. 

[weinrauch]

Thank you for your reply!  I did some further research and found the tax guide that is published annually by a lawyer and the former long-time head of our local chapter of The Arc (a special needs advocacy organization).  This is what the guide states regarding this issue:

"NON-TAXABILITY OF SUPPLEMENTAL SECURITY INCOME (SSI)

SSI is not taxable for the person receiving the benefit.  If the SSI recipient in Michigan is receiving a combined federal and state benefit at the Sharing/Independent level (a total of $957.00 for 2024; $981.00 for 2025) and is paying his/her “pro-rata share” of the household expenses, then that share is not taxable income to the householder who receives the money.  This is true whether the householder is a parent or other relative or an unrelated person.  The share is not taxable income because it is merely a reimbursement to the householder for that portion of expenses attributed to the SSI recipient.  This situation may be more easily understood by likening it to the situation where four college students share an apartment.  Each student is responsible for one-fourth of the household’s expenses and no one’s individual share is considered as income to anyone else.

In a different set of circumstances, if the SSI recipient is paying either “rent” or “room and board” to his/her parents (or anyone else for that matter), then those “rent” or “room” payments (minus expenses incurred) are considered income to the parent (or another landlord).”

We believe that we meet the criteria in the first set of circumstances.  However, it appears that the only difference between the two circumstances is what the money is referred to as (“share” versus “rent” or “room and board”).  If that’s the case, who makes that determination?  During the initial interview for SSI, they ask whether you’re charging your child rent or not and if so, how much.  That amount is on record with them and is referred to on our child’s SSI document as “rent".  Can we choose to refer to it as her “pro-rata share” of household expenses for tax purposes even though the SSA refers to it as “rent” on the SSI document?  Also, we don’t know whether this matters, but in addition to the amount listed on that document as “rent” (which is the amount we came up with as her fair share for housing toward our mortgage payment), we have her pay an additional amount toward her share of the utilities.

[weinrauch]

I should add that we do not have a formal rental agreement.  We did not create or sign anything stating that our child is paying us rent, other than the fact that one of us had to sign the SSI document for providing the information for our child's case.

[Vanessa A · Accepted solution]

The IRS makes the determination.  However, when a child is paying "their share" of the expenses and you are not trying to make a profit, this is not considered rent.  This is simply cost sharing.  As you mentioned in your post, this is simply reimbursement for expenses. 

If you were trying to make a profit or charging her a Fair Market Rent based on the rent you could get in the area and NOT on the cost of total expenses for your home, then yes, it would be a rental.  How it is listed on the SSA form does not determine how it is treated.  

[weinrauch]

Thank you very much for the details and your help!