Disabled Adult Son pays $300 a month, is it considered taxable income?

[lilmisscrzygrl]

I know this question has been asked and answered before but I am still perplexed on the situation. 

I have an adult disabled son who receives SSI. In order to get the full amount of SSI we have to charge him rent. We charge him $300 a month. If you add up all our expenses and people living in the household this is my sons fair share of the household bills. I also put the money straight to the household bills. On the other questions people were told that they had to claim this money as taxable income because rent is considered taxable income. I would just like more clarification on the situation. SSI is suppose to be non-taxable income. So, once it leaves my sons bank account and goes into mine is that what makes it taxable? It should also be noted that we don't have a formal rental agreement. 

One of the reasons why I am so confused about this situation is partly because of the Home Help Services (AHHS) program. I get paid by the state to help my son complete certain tasks because he is disabled. This income is reported to me and I put it on my tax return. However, this income is considered non-taxable. My understanding is the government is trying to give tax breaks to parents to try and reduce the need to place the disabled person in a facility that would end up costing the government much more money. If the IRS is willing to do that for parents, why would they then turn around and charge income tax on the $300 I get from my son's SSI? 

I would also like to know if there is a section in the tax code that addresses the SSI and paying rent situation. I have been doing so much research but I can't seem to locate anything on the tax code about it. 

Who decides if my son is paying rent or his fair share of the household expenses? It should also be noted that I have reviewed a tax guide that has been published for 49 years for people with disabilities. In this guide it says that shared household expenses are non-taxable and rent is taxable, but it doesn't clarify how you know which situation you have. Or by default is all the SSI paid as rent considered taxable and does the IRS code reference that specifically? 

[Bsch4477]

Your son is cost sharing. No reporting is necessary. 

[lilmisscrzygrl]

But how do you know for sure? Is there something I can reference?

[TeresaM]

Yes, if you are charging him below fair market rent value and he is simply sharing some of the household expenses, then it is cost sharing. 
If you were charging enough for the purpose to be making a profit, that would be rent. 

Click here for a HUD calculator to help determine fair market value rent.

This is an IRS tool to help you determine if the rent it is considered taxable income or if expenses can be taken as deductions. 

@lilmisscrzygrl

 

[lilmisscrzygrl]

Thank you for the response. I have tried the IRS tool and it says the income is taxable. I don't feel like I answered the question correctly though or it doesn't really work with my situation. 

[lilmisscrzygrl]

Another thing I don't understand is how other people who have asked the same question have gotten different answers in the TurboTax community? 

[DianeW777]

Here is the bottom line.  If your son is simply reimbursing you for his expenses such as utilities, laundry, food, etc., then this is not rent. 

Rent is considered income, however, in your situation you would be allowed to deduct expenses attributable to the rental income which would zero it out per your initial discussion.  Since you are not renting for a profit, then you would be limited on the deduction of expenses to the amount of rent received.  This means there would be no excess deductions allowed to offset other income on your return. Expenses are limited to the amount of rent received.

How do I know you are not renting for a profit?  At the rate of $300 per month it's highly unlikely that would be considered fair rental value in your area when comparing to a similar situation. Any rent charged that is below fair rental value in the area where you are is considered a 'not for profit rental'.

• IRS Publication 527 (see page 16).

If you want to report it as rent and report the expenses you pay with it you can do that to show no profit or loss.

• Where do I report rental income and expense in TurboTax?

@lilmisscrzygrl 

[lilmisscrzygrl]

I still don't know if this answers all my questions. We had a large retirement withdrawal and have to pay taxes this year. If I put the rent down as not for profit then I owe another $1k. Which if it is correct than that is fine. I just want to be sure because I put all the money straight to household bills and it was only his fair share and actually probably less. SSI refers to this money as rent. Is the SSI label of rent enough for it to be considered taxable? 

Also, when you rent not for profit, the deductions have to be itemized correct? I don't think I have enough deductions to itemize anything so I can't zero it out. I am not sure about that second part. I am going to log into TurboTax and check it out again. 

[Vanessa A]

When you rent not for profit, then your deductions are listed the same as they would be regular renting, but they are limited to the amount of rent received.  

As all the others have said, what you are describing in your situation is not rent.  It is cost sharing.  He is contributing to the household.  If you were living with a significant other and split the mortgage and bills all 50/50, it would not be considered rent, it would be cost sharing. 

Intent has a lot to do with it.  Plus, you are sharing a home.  The thing with tax laws, one minor change in the situation can actually make a big change in how something is classified.  Your situation sounds like you could even claim your son as a dependent on your return...if he is only getting disability....you would not claim rental income from a dependent. 

[lilmisscrzygrl]

Thank you for the response. I did look into claiming him, but I don't think I can because he gets the full amount of SSI. I think I read it on the Social Security website. I will double check though. 

[lilmisscrzygrl]

I was wrong. I read it on a tax guide for disabled people.

https://www.thearcoakland.org/wp-content/uploads/TaxGuide-2023-FINAL-doc-JAN-16-2023.pdf 

CAN SSI RECIPIENTS BE CLAIMED AS A DEPENDENT?
All SSI recipients in Michigan who receive federal plus state benefits at either the
Sharing/Independent level (a total of $855.00 for 2022; $914.00 for 2023) or Personal Care
(adult foster care home or group home) level ($998.50 for 2022; $1,071.50 for 2023) cannot be
claimed as a dependent for income tax purposes. This is because a person on SSI at a rate other
than the Household of Another level (a total of $570.00 for 2022; $618.67 for 2023) is by SSI
regulations defined as someone who is not someone else’s dependent. If the SSI recipient is
claimed as a dependent according to the I.R.S. regulations, then the SSI program will consider
such support against the SSI recipient and only the Household of Another level of benefits will
be paid.
20
An adult SSI recipient who receives the combined federal and state benefits at the
Household of Another level ($570.00 for 2022; $618.67 for 2023) may be claimed as a
dependent by a person who can show that they provided more than half the SSI recipient’s
support. In figuring total support, the SSI income must be counted. If the yearly total of SSI
received is less than the amount of support provided by a parent or another person, the SSI
recipient may be claimed as a dependent if all other dependency requirements are met.
SPECIAL NOTE: Michigan provides a monthly state SSI supplement for both the
Household of Another and the Sharing/Independent rates. Although recipients of SSI in
Michigan, during 2023, will receive a check or a direct deposit from the federal government
(either $609.34 – Household of Another, or $914.00 – Sharing/Independent) on the first of every
month, the State of Michigan sends its monthly supplement amount (either $9.33 – Household
of Another, or $14.00 – Sharing/Independent) on a quarterly basis included within one state
check, or via direct deposit, on or about March 10th, June 10th, September 10th and December
10th.
Individual recipients in Michigan who only qualify for a “state supplement” amount of SSI
each month (due to the receipt of other income like Social Security disability benefits, and/or
some work earnings) must forego not only this money, but they are required to go through a local
Michigan Department of Health and Human Services office (or, on-line) and annually re-apply
for Medicaid benefits.