If You Rent a Room in Your Own Home, Then Do You Have to Include Rent Money As Income?
The Internal Revenue Service reports that you must report income from renting a room in your home if the room is rented for 15 or more calendar days during the tax year. The IRS considers "any payment you receive for the use or occupation of property" to be rental income. This includes informal arrangements such as a friend staying for a few months as a roommate or formally renting out a room with a signed lease agreement.
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Payments
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Income received from tenants must be reported if the money is related to any household expense such as rent, utilities or repairs. Example: A person rents a room from you for more than 15 days in a calendar year and pays $600 a month for the room, and an additional $150 for access to the pool, high-speed Internet, satellite television and other amenities. You must report the entire $750 on your tax return although only $600 was charged for rent. Some of the income may be offset by claiming deductible rental expenses. Certain costs you incur for upkeep and maintenance as a landlord may be deductible and can be pointed out by your tax adviser.
Multiple Roommates
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The IRS expects you to report income from all roommates living in your home if they are tenants for more than 15 days during the tax year. For example, one roommate may have a formal lease agreement, while a sister or cousin may be living in the home temporarily. You may not be charging the family member rent, but any money she offers for utilities is also considered income and should be reported on your tax return.
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Security Deposits
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Security deposits are not considered income, according to the IRS, and should not be reported if you plan to return the money to the tenant at the end of the lease. However, the security deposit does become income if you keep all or part of it because the tenant moved out before the lease expired or violated the terms in some other way. The IRS requires you to report the security deposit as income in the same year that you notified the tenant that the deposit was being forfeited.
Advance Rent Payments
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In addition to security deposits some landlords request rent payments in advance. The IRS reports that the advance rent payment must be considered income in the year that you receive it, regardless of your personal accounting methods or when you consider the advance payments have actually been applied to the tenant's account.
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