Rental income

[monalisa67]

Our 19 yr old son lives with us and receives SSI.  He pays us rent for room and board and utilities. We turned in a rental agreement to Social Security. Do we have to claim this as income? And if so, can we deduct a portion of our utilities, home owners, property tax and/or other household expenses to offset the income?

[DianeW777 · Accepted solution]

Yes, if you are charging rent to your son then it is considered rental income.  The key question is whether this is a 'not for profit' rental.

Based on your information is seems you did not rent this home with the purpose of making a profit.  Assuming this was the intent, here is the information about your rental income and expenses.

Not Rented for Profit  (IRS Publication 527)

If you don’t rent your property to make a profit, you can’t deduct rental expenses in excess of the amount of your rental income. You can’t deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year.

Where to report. 

Report your not-for-profit rental income on Schedule 1 (Form 1040), line 8 (other income).

If you itemize your deductions, include your mortgage interest and mortgage insurance premiums (if you use the property as your main home or second home), real estate taxes, and casualty losses from your not-for-profit rental activity when figuring the amount you can deduct on Schedule A.

In TurboTax, when you are signed into your account you can enter the income as follows:

1. Click on Federal > Wages & Income.
2. Scroll down to Less Common Income section.
3. Click on Start/Revisit box next to Miscellaneous Income.
4. Scroll to Other Reportable Income Click Start/Revisit.
5. Enter Description and amount (do not reduce the income by the portion of property tax)

Include the property taxes and mortgage interest under Deductions and Credits \

If you do have a profit motive you can choose to report the income and a percentage of all home expenses based on square feet rented to total square feet of the home.  This would be reported as rental income and reported on Schedule E.

• Search > Rentals > Click the Jump to... link > Begin your entry for your rental

[monalisa67]

We are not renting for profit. Is this considered a cost sharing scenario? And if we don't have enough deductions to itemize, does that mean we can't  offset any of the rental income?

[DianeW777]

Yes, that's what it means. If you itemize your deductions then mortgage interest and real estate taxes could be used, however none of the expenses can directly offset the rental income in a not for profit situation.

[monalisa67]

Ok. So to make sure I understand what you are saying, the $500 rent he pays and the $50 for utilities would just all be considered as income then with no offsets for any costsharing or

Can it be considered as a contribution to the household. He uses 2 of our 6 bedrooms.

[KrisD15]

"Ok. So to make sure I understand what you are saying, the $500 rent he pays and the $50 for utilities would just all be considered as income then with no offsets for any costsharing or"

It depends on your Rental Agreement. If only 500 is rent and an additional 50 goes to utilities, I assume you would claim 500 a week as rental income. 

"Can it be considered as a contribution to the household. He uses 2 of our 6 bedrooms."

No, not if you have a rental agreement.