My mom is her 80s and has moved into my home and live with us (my wife, my toddler son and me). She pays 1/3 of all utility bills (water, sewer, electricity, gas and cable/internet) and 1/3 of property tax. Otherwise she does not pay rent or any mortgage principle/interest/home insurance related expenses. Do I need to report what she has paid as described above as income on our (my wife and I) income tax return?
That is just family members sharing expenses and is not income.
Even if she paid a fixed amount, each month, like rent; it would not be income if it only reimbursed you for household expenses.
Follow up question 1: Can someone double confirm that her payment on property tax would not be considered as income?
Follow up question 2: Some earlier posts have suggested that if it would be in the form of rent above and beyond sharing household expenses, it would be considered as income (e.g. paying a fair market rent for a room comparable to those advertised on Airbnb in the same township), is this correct?
Final question: If a few years down the road, she ended up in nursing home and had to apply for Medicaid, would any of these household sharing payments be considered as gifts thus subject to Medicaid look back penalty?
#1 - It is not income. It could be considered to be a gift or just sharing expenses, but either way it is not reportable or taxable income.
#2 - What you describe is not rent unless you have a formal rental or lease agreement which would be very unlikely in a family situation like yours and the rental is intended to be profitable (and if your mother moved out, then you would rent to someone else.)
#3 - Not a tax question. You would need to ask that to the agency involved.
Thanks folks for answering. I am a bit baffled why her payment for part of the property tax would be considered as gift? By definition, "gift" means transfer of property by one individual to another while receiving nothing, or less than full value.
Gifts can also be cash ... but in your situation it would not be a gift. If you are worried about medicaid qualifying later then have her start giving you a check and you pay all the bills. Gifts up to $15K per person per year are allowed for medicaid planning ... seek local professionals for medicaid planning advice ... an attorney who is in the elder law is best.
"#3 - Not a tax question. You would need to ask that to the agency involved".
I agree with that comment, but am of the opinion that what you describe is your mother paying her own living expenses and is not gifts (or rent). In other words, it is not necessary for you you to call it "rent" in order for it not to be "gift".