Renting out a room in my TownHome

[RagingBITCH]

Uncle Sam doesn't need to know nor care. I lived for a year and a half with my buddy doing that (I was the payee).

 

[EagleKeeper]

Originally posted by: RagingBITCH
Uncle Sam doesn't need to know nor care. I lived for a year and a half with my buddy doing that (I was the payee).

Other than the fact that it is illegal to not report the income.

IRS - Rental Income

Cash or the fair market value of property you receive for the use of real estate or personal property is taxable to you as rental income.

 

[ebaycj]

Originally posted by: RedShirt

If you do not rent your property to make a profit, you can deduct your rental expenses only up to the amount of your rental income. You cannot carry forward to the next year any rental expenses that are more than your rental income for the year. For more information about the rules for an activity not engaged in for profit, see chapter 1 of Publication 535.

Link

Let's say my mortgage was $1200 a month and I charged my roommate $400 a month. Does this classify as not for profit?

I think I'm going to have to make an appointment with a Tax adviser

First off, you should be charging him 1/2 the mortgage bare minimum. Unless you feel like you should be penalized for owning property vs. renting.

 

[ebaycj]

Originally posted by: RagingBITCH
Uncle Sam doesn't need to know nor care. I lived for a year and a half with my buddy doing that (I was the payee).

I should send this post to the IRS. You deserve an audit.

 

[ebaycj]

Originally posted by: Uhtrinity

Originally posted by: KLin

Originally posted by: RedShirt

If you do not rent your property to make a profit, you can deduct your rental expenses only up to the amount of your rental income. You cannot carry forward to the next year any rental expenses that are more than your rental income for the year. For more information about the rules for an activity not engaged in for profit, see chapter 1 of Publication 535.

Link

Let's say my mortgage was $1200 a month and I charged my roommate $400 a month. Does this classify as not for profit?

I think I'm going to have to make an appointment with a Tax adviser

That's saying you can cancel out any rent income with expenses. Any extra rent income would need to be reported as part of your income.

If he occupies 1/3 of the house, 1/3 of your minor and major improvements to the house are deductible. You can also deduct 1/3 of your property taxes and property insurance. I have owned a duplex for about 5 years now, with 1/2 of the entire property being a rental, with my son and myself occupying 1/2. Just be sure to save any receipts that deal with upkeep and maintenance, ranging from a box of nails to any major appliances. The Turbotax online forms cover all of these areas in pretty good detail. Also be sure to have a lease or rental agreement so your roommate / tenant knows what is expected.

I don't know about you, but TurboTax had me deduct 100% of my property tax due to it being paid on my primary residence.

 

[deerslayer]

Originally posted by: thedarkwolf
Dude just do it under the table. If any problems come up just say he is your life partner.

:thumbsup:

 

[skrilla]

I have a townhome and rent out a room to a buddy of mine.

When it comes tax time, I claim the rental income. Turbo Tax makes it pretty easy. Also, I have so many expenses (utilities, real estate taxes, repairs, etc.) that it pretty much offsets the income and I don't really lose money or make out any way.

 

[markgm]

I too rented out a room, and by claiming it on my tax return I got more money back than if I had not claimed it. Following the law FTW!

 

[SoulAssassin]

Originally posted by: ebaycj

Originally posted by: RagingBITCH
Uncle Sam doesn't need to know nor care. I lived for a year and a half with my buddy doing that (I was the payee).

I should send this post to the IRS. You deserve an audit.

Who pissed in your Cheerios this morning?

 

[RagingBITCH]

Originally posted by: SoulAssassin

Originally posted by: ebaycj

Originally posted by: RagingBITCH
Uncle Sam doesn't need to know nor care. I lived for a year and a half with my buddy doing that (I was the payee).

I should send this post to the IRS. You deserve an audit.

Who pissed in your Cheerios this morning?

Guess there's no such thing as helping out a friend anymore.

 

[RedShirt]

In doing more research, it does appear that actually "following the rules" may help more than it hurts, at least financially

It's just I'm a very lazy person, and I was hoping I wouldn't have to keep track of all my expenses etc etc and just charge my roommate x dollars a month and not have to report it as income, not have to keep every single little home related receipt, etc.

At work today I brought up all this with my potential roommate, and he wishes to play be the rules, but he too thinks it's a little crazy to have to do all this.

His solution was to put all utilities in his name (if you include telephone, cable, and internet, electric, this would be about to $200 a month) and then pay for "x" amount of groceries etc.

I wonder how legal this solution is.

 

[RedShirt]

Yet more questions arise

You have to declare how much of your property is rented for deductions. The most common way is by looking at square feet used or "belonging to" the renter. Well, we'd basically share every single room, except our bedrooms. (Kitchen, LivingRoom, Garage, bathrooms [there is no bedroom bathroom]). Let's just say that each bedroom is 20% of the townhome square feet. Does this mean 80% of the property is "rented", since we share all rooms but the bedrooms? Or is it 50% rented because each room is "shared" therefore 50% is mine and 50% is his? The bedrooms are the same size.

 

[ColdFusion718]

Originally posted by: RedShirt

Originally posted by: Drakkon
If theres a book on it amazon has got it

1 used & new available from $109.50

Seems to be quite expensive!

The part that makes finding this information somewhat difficult is that I will be living on the property as well... This seems to be extremely common in the UK, but not so much in the USA.

Secondly, I don't know if I like the idea of starting my own company just to collect Rent. I mean, if this is how one legally needs to do this, then I will, but that seems to be a bit of work.

I should say that I trust the person that would be renting from me 100%.

Corporations spend money first, then pay taxes based on their profit. Private individuals pay taxes first then spend whatever they have left.

The choice is up to you. I recommend you read Rich Dad, Poor Dad.

It's an easy read with some very insightful, yet simple concepts.

 

[brtspears2]

I had the same situation. I just claim it as a misc income not reported.

 

[ColdFusion718]

Originally posted by: RedShirt
In doing more research, it does appear that actually "following the rules" may help more than it hurts, at least financially

It's just I'm a very lazy person, and I was hoping I wouldn't have to keep track of all my expenses etc etc and just charge my roommate x dollars a month and not have to report it as income, not have to keep every single little home related receipt, etc.

At work today I brought up all this with my potential roommate, and he wishes to play be the rules, but he too thinks it's a little crazy to have to do all this.

His solution was to put all utilities in his name (if you include telephone, cable, and internet, electric, this would be about to $200 a month) and then pay for "x" amount of groceries etc.

I wonder how legal this solution is.

That's how I would define "life partner." He's going to be living with you, sharing the expenses, etc. As far as uncle sam is concerned, he's your life partner. You just don't sleep with him that's all (and there's nothing wrong with that). So, yeah it's legal.

 

[Flyback]

Tip #1: Don't become a landlord. Too many problematic people

(Not to disuade you, but in some areas the renters have too many rights.)

 

[EagleKeeper]

Originally posted by: RedShirt
Yet more questions arise

You have to declare how much of your property is rented for deductions. The most common way is by looking at square feet used or "belonging to" the renter. Well, we'd basically share every single room, except our bedrooms. (Kitchen, LivingRoom, Garage, bathrooms [there is no bedroom bathroom]). Let's just say that each bedroom is 20% of the townhome square feet. Does this mean 80% of the property is "rented", since we share all rooms but the bedrooms? Or is it 50% rented because each room is "shared" therefore 50% is mine and 50% is his? The bedrooms are the same size.

50% of the property costs could be classified as rental expense, based on the bedroom rule.
Or 20% of the expenses based on the square footage.

The 50% rule is much more tax friendly.

 

[Uhtrinity]

Originally posted by: Flyback
Tip #1: Don't become a landlord. Too many problematic people

(Not to disuade you, but in some areas the renters have too many rights.)

Tip #2, if you become a landlord be picky who you rent too. My current tenants are going on their 4th year, nearly zero issues in that amount of time and never late on rent.

 

[Uhtrinity]

Originally posted by: ebaycj

Originally posted by: Uhtrinity

Originally posted by: KLin

Originally posted by: RedShirt

If you do not rent your property to make a profit, you can deduct your rental expenses only up to the amount of your rental income. You cannot carry forward to the next year any rental expenses that are more than your rental income for the year. For more information about the rules for an activity not engaged in for profit, see chapter 1 of Publication 535.

Link

Let's say my mortgage was $1200 a month and I charged my roommate $400 a month. Does this classify as not for profit?

I think I'm going to have to make an appointment with a Tax adviser

That's saying you can cancel out any rent income with expenses. Any extra rent income would need to be reported as part of your income.

If he occupies 1/3 of the house, 1/3 of your minor and major improvements to the house are deductible. You can also deduct 1/3 of your property taxes and property insurance. I have owned a duplex for about 5 years now, with 1/2 of the entire property being a rental, with my son and myself occupying 1/2. Just be sure to save any receipts that deal with upkeep and maintenance, ranging from a box of nails to any major appliances. The Turbotax online forms cover all of these areas in pretty good detail. Also be sure to have a lease or rental agreement so your roommate / tenant knows what is expected.

I don't know about you, but TurboTax had me deduct 100% of my property tax due to it being paid on my primary residence.

it may have been 50% of the insurance and 100% of the property tax. Point is with something like turbo tax handling the tax side of a rental is pretty easy.