Reporting rent from renting room in a home that is only deeded to them; will this be sch E or other income?

[1stoptaxservice]

When a client is owner of the property (was deeded to them), but are not liable for the loan, and they rented a room out to help with the mortgage, are they to report the income on Schedule E or report as other income? (They are not liable for the loan; it was deeded to them). They normally do not rent the room as an investment. The case is a person is charging rent as shared expense since daughter and boyfriend live at home and need to contribute to the mortgage payment.  Thoughts?

Greatly appreciate this community like always.

[IRonMaN]

Is mom (or dad) really renting out a room, or is daughter just helping out covering household expenses so she isn't deemed to be a freeloader?

[1stoptaxservice]

Yes, that is the idea, contribute to household expenses and not freeload mom.

[IRonMaN · Accepted solution]

Then I don't think you have to worry about reported rental income.

[1stoptaxservice]

Thank you for the responses and allowing the gears to move around my head.  I wonder if you have an ACME Tip Jar.

Have an awesome and exciting tax season!

[IRonMaN]

I got rid of the tip jar years ago ------------ getting all of those tips knocked me into a higher tax bracket.

[1stoptaxservice]

Thanks for the laugh, I needed that.

[IRonMaN]

You betcha!

[qbteachmt]

The way it's all asked to start with is obfuscating the issue of determining if there is Rental Income.

To clarify: any loan has nothing to do with what you are asking.

Who owns the house has nothing to do with what you are asking.

To simplify for your future reference: the person in possession of (occupying) the house (whether owning, or renting from another, and whether there is debt or not) is either letting something else live there and charging them Rent as Income (like getting a roommate off of Craigslist) or letting family live there and having them help pay expenses for living there.

Hope that helps the next person.

[1stoptaxservice]

I wanted to present the situation with as much details. I wasn't sure if Schedule E (rental) was way to report the income if they are sharing household expenses. Was trying to find something of that nature in Pub 527; whether its shared household expenses two families living in a home, now that I am diving more into this vs. rental of room.  Just tryin to see if should it be a schedule E and use all the other deductions that fall under Schedule E or use Other Income Schedule 1 line 24 other  taxable income, which is just reporting the income received from the room.

So many scenarios with mixed family situations. Here trying to gather intel on how others view this situation and thank you again for input.

[singh]

If you are renting a room in which you are living and the renter does his/her tax return and claims on the return that he/she paid rent to get rental credit then there is a posibilty that State will question the income you received by renting a room. This is true for CA. On CA form 540 there is a form to be filled to claim rent. A single tax payer gets $60.00 and Married filing joint return gets $120.00 as credit. This credit is non refundable for CA state. To avoid this situation the renter should not claim the credit.

[1stoptaxservice]

Another item to be considered, surely will take that note as well.

Thank you,

[qbteachmt]

It's a matter for facts and circumstances. If you and I rent a house and split the costs, neither of us is making the other pay us rent with the intent of income. Even if only one of us is on the lease, and makes the rent payment, and the other roommate then reimburses for their share, that isn't renting a room for income purposes. But, an example of my owning or renting a 6-bedroom house near a university, and then charging by the room to students rotating in and out of school, is an example of rental income for me.

The IRS has guidance for this. Examples:

https://www.irs.gov/taxtopics/tc414

https://www.irs.gov/newsroom/know-the-tax-facts-about-renting-out-residential-property

[1stoptaxservice]

Thank you for rephrasing it as it makes more sense now. Greatly for this community and the links provided.

Have a great day!