I am the sole homeowner of a single-family home not in an HOA, I live alone with no family. Since my husband passed a few years ago, I am in need of someone to help with expenses. I’m not looking for another relationship. I would like a roommate (or in my case, house-mate). My township’s zoning code says we are allowed up to 5 unrelated people in a home.
I would think a group of 5 people living together would contribute towards monthly expenses.
I do not want to say "renting a room" since they will live in the house as if it was theirs, and we will use the same kitchen, living room, etc, they will not have a private entrance or any private living quarters. Their only private space is their bedroom. They will buy their own groceries and cook their own meals.
The house is a normal single-family home.
Their monthly contributions will be less than my monthly mortgage amount. I will not make any profit in this case, so this would be a nonprofit dwelling, as stated in the zoning ordinance.
All the bills are in my name so the only way they can contribute is giving me money to deposit and pay the bills.
Do I still have to report this as income?
You might want to read this previous TT answer: https://ttlc.intuit.com/questions/2633489-do-i-have-to-claim-income-from-renting-a-room-in-my-primar...
Simple answer: No.
If this is merely a cost sharing arrangement where the amount paid is below fair market rental, there would be no reportable income to you. If the “rent” amount is fair market value, or more, there is still some question as to whether you even have to report it, as it almost always comes out zero. Most people take the attitude that it is not income; it's just room mates sharing expenses and ignore it. Family, as opposed to unrelated roommates, makes that position stronger.
Here’s what you may be required to do:
Report the income (enter at Rents & Royalties/Income & expenses from Rental Properties); then deduct the expenses. TurboTax will do this on schedule E. If the room mate has full run of the house, and there's just the 2 of you, then half your expenses are deductible (mortgage interest, property taxes, insurance, utilities, repairs, and depreciation [if needed}). Your net income will usually be less than zero.
What you are NOT allowed to do, because it is your own home (you have "personal use") is claim a loss from this activity, to offset other income. Because of the "personal use rule", your deductions are limited to your income. Net effect ZERO.
It is possible for you to gain a positive tax effect from this activity; If enough of your schedule A deductions (mortgage interest & property tax) are shifted to Schedule E, and your standard deduction becomes bigger than your itemized deductions, you will have effectively saved on taxes.
If you have no mortgage, then there could well be profit involved, which you may have to offset with depreciation that could lead to "recapture" in the future when the property is sold.