Girlfriend moving in is her household contribution taxable

[acf1]

My girlfriend and her son are going to move in with me into the house that I own (well mortgaged). She is going to give me $600 towards bills and running the house and deposit that once a month to my checking account.

There is no rental agreement to be set up as we do not deem this a rental and we will be sharing all rooms and my bedroom as a family. We are taking the single payment approach as all bills are all in my name and we think its the simplest way for us as an unmarried couple.

Question 1: I believe this is considered cost-sharing and I do not need to report anything on my tax return in terms of rental income (600*12 months). Is my understanding correct or could the IRS consider this rental income because of the monthly deposit?

Question 2:  Because there is no rental agreement and a nominal amount I assume now my girlfriend can no longer claim head of household as she no longer rents - Pretty sure on this but just checking?

Notes:

• Girlfriend is not looking to claim anything against mortgage or interest as she is not named so that is not part of this question. Only concerned around "rental income" aspect of her deposit towards bills
• Not looking to claim her payments as rent on her state taxes as in Florida either.
• I'm not looking to claim her son as a dependent she will file desperately. assuming now Single

[Hal_Al · Accepted solution]

Question 1: I believe this is considered cost-sharing and I do not need to report anything on my tax return.

A. That is correct.  There is little or  no IRS audit risk, as even when these things are rent (and that's seldom), it usually results in a loss, not a taxable profit. A loss would not be deductible. That's actually the more common question, in this forum: can I deduct the loss from renting out a room in my house? The answer is no. The "personal use" rules prevents this.

Question 2:   I assume now my girlfriend can no longer claim head of household?

Simple answer: Correct, she can not claim HoH.  However, if she can show that her $600/Mo contribution to expenses amounts to more than half of the total household expenses, she can be HoH. Food expenses are also part of HoH qualifying expenses.  The fact that she doesn't pay rent, does not exclude her from being HoH.  Her contribution being only "nominal" would prevent her from claiming HoH.