Rent vs Gift

[arunp1982]

My mom has agreed to pay off the remainder of my home loan on my 2nd home, but she is living in my 2nd home rent free so far. Would this be considered as a gift or rent and does this misc income go on my tax return ? Really confused.

[Critter-3]

It is simply a non taxable gift.  If this ends up being more than $16K then she should spread the gift out over more than one tax year  or she will need to file a gift tax return just to report the excess given in one tax year. 

[arunp1982]

Great. Thanks. When does this become rental income ? If she pays in installments of 4 or 5  for example.

[ThomasM125]

It depends on whether it is a gift or not. A gift is something received for which you don't have to give anything in return. So, if she paid off the mortgage and in return is staying rent free, then the payment would be rent and would need to be reported on your tax return as such.

You will see a section in the Income and Expenses area of TurboTax where you can enter rent income and related expenses, such as property taxes, repairs and insurance.

If she was staying there rent free before she paid off the mortgage, then it might be considered a gift.

@arunp1982 

[Edited 3/10/22 at 5:58 PM PST]

[ThomasM125]

Rent income would be recognized when paid. So, what she paid during the year would be the rent income, so it would be best for her to not pay more than what would be a normal rent each year.

[Mike9241]

was the amount of the payoff fair rental value.    this is hard to determine because she could be paying you rent in advance..  say the payoff is $100K but fair rental is $25K per year.

the extra $75K could be a gift or could be advance rental

on the other hand different rules would apply if its deem rent but less than fair rental value.

it comes down to the intent of the parties with the courts and IRS being the judges.