Are all the steps necessary when renting a room to a relative (my youngest daughter who was receiving monies monthly from the county)?

[may488]

It was offered at a reasonable rate and covered everything as I believe the county based it on.

[xmasbaby0]

Do you have some sort of written lease or rent agreement with your daughter?   Usually this sort of arrangement is just family cost sharing and does not get entered on a tax return.

[Carl]

You don't say why your daughter is receiving monies from the county. Unemployment? (usually paid by the state - not the county).

Generally, if the monies being paid to your daughter are for her to pay rent with (among other things, and it's usually designated for rent as one of the things it's for), then whoever she pays that rent to is expected to report it as income on their tax return. So you'd report it on SCH E as a part of your personal 1040 tax return.

[may488]

Carl,

I received an earlier reply from someone who said that if there is no rental or lease agreement with my daughter, this sort of arrangement is usually considered family cost sharing and does not get entered on a tax return.  I received no statement from the state saying they paid me the money.  Yes, the checks come from the state but it is from the local county program to help people get better employment.

Thanks for your response.  But I am now totally confused.  

[Carl]

Really nothing to be confused about. It could only matter if the payments from the state were specifically designated for rent. As I understand it, you say they are not designated for anything beyond finding employment (i.e.; employment assistance). So if your daughter is just living with you while seeking employment so she can find her own place eventually, I'd just consider it a cost sharing arrangement where she's just helping with the increased costs of food, utilities and the such while she's living there.

So depending on the legal requirements you daughter may be required to report the income on her own tax return if she's required to file one.  (If she got a tax reporting document from whatever entity pays her the money, that's a good indication it's required to be reported on her tax return.)  But has far as what she pays you in such a situation, I'd probably consider it as just "helping out" with the expenses. I wouldn't worry about it and not bother reporting anything on SCH E

There are some situations for some types of assistance payment where the recipient has to "prove" their expenses to justify the amount of assistance they receive. Generally one form of proof is a lease agreement. If something like that was in play, then you'd need to report the rental income.