is rent income?

Texas

My son lives with me and is going through a divorce. On the financial statement he presented in court he said he pays me x amount of money for rent and utilities. Do I have to count this money as income on my taxes when I file?

If your son pays you rent, it is taxable as rental income; however, you can deduct your expenses, including depreciation on the portion of the house he rents. I suggest you read about rental income and expense in IRS Publication 17, which you can download for free at IRS Forms and Pubs: http://www.irs.ustreas.gov/forms_pubs/index.html

Loku is correct in that you can deduct those expenses and even depreciation on the 'rented' portion.

However, I do not suggest you do that. Once you have declared depreciation on even a portion of your house, you will be forever caught in a quagmire of IRS regulations. Depreciation is used to reflect the long term (27 to 30 year for houses) straightline loss of value of the house. If you only show it (or a portion) as 'loss of value' you will have to recapture that writeoff when you sell the property.

Thank you for your reply. What about the money he said he gave me for utilities. Do I include this as income also?

excuse me...

texas.......sorry to interrupt dj ... but halket, so you are saying don't show any depreciation ( it is your option to show this or not?) of any portion so you are not caught up for years in trying to recapture? to show only the rent as income? and no depreciation? i have called the irs about this same situation, and of course they told me to show depreciation and and are sending me numerous publications i'm sure i won't understand. I will probably have my house for many more years, it is not paid for yet, and don't want any long time issues with the irs. is depreciation going to help that much for the few rooms they will let you claim? although my tenant will be using most of my house they told me i could only claim the bedroom and bath he would be using. i am not charging him just for his rooms but for the use of my whole house as if it was his area, as he won't be only confined to his rooms! irs reps can be wrong, is this your opinion also? here is something i got straight off the irs site:
"If you rent buildings, rooms, or apartments, and provide only heat and light, trash collection, etc., you normally report your rental income and expenses in Part I of Schedule E (Form 1040)"...and then this "If you provide significant services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, you report your rental income and expenses on Schedule C (Form 1040), Profit or Loss From Business or Schedule C-EZ, Net Profit From Business. Significant services do not include the furnishing of heat and light, cleaning of public areas, trash collection, etc. For information, see Publication 334, Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ). You also may have to pay self-employment tax on your rental income. See Publication 533, Self-Employment Tax. " so are they saying since i will providing all of these services that i will have to fill out sched e and c? the irs man also told me if i provided meals i needed also to send in schedule cez for resturant deductions/expenses. these items are straight from the irs site which is kind of a lead in to dj's ? regarding utilities which i would also be interested in. from what i am reading, the irs is saying you can divide utilities up (a percentage?) as to how much the tenant uses as opposed to how much you/your family uses. but not sure what to do with these expenses. the irs told me that i would have to pay self employment taxes also on rental income. 15.3%!! this says you may have to pay but i think it has something to do with how much rental income you make right?
sorry so long, but this is also something i've been wondering about. thanks to all!texas

First, let me point out, I am NOT an IRS tax expert. But I have had a few toe-to-toe's with the IRS and have done my own taxes every year (kind of proud of that!).

So, as usual, the following is my OPINION:
1) The difference in forms to file is that if you are providing 'services' (linens, maid service, etc.) you are considered to be in the lodging business. That would require the separate business form C. However, if you are just providing a room in your home, that is NOT considered to be a business (I am sure that they would take this differently if it were for 25 people!!).

So, to answer your question, I do not think it is worth the potential hassle and increased audit chances to claim depreciation or deductions to try to offset reported 'roomer' rent. Lets look at an example:
Renter pays you $200 per month, or $2400 per year. Lets assume that ALL of that is taxable income at the highest rate (about 25%), the tax liability will be about $600.00. Now, lets say that you depreciate and deduct as much as $500.00 (and that would be unusually high). Your taxable income from rent is now $1900, with tax of $475.00. Simply, you have saved all of $125.00 in taxes. But, in order to do that, you will have to figure out some new forms, take the time completing them, and open up a potential future 'can of worms' in possible problems later about why you are no longer renting (in a few years) and how to recapture that portion of the house that you have depreciated.

Personally, it really isn't worth it. Take the $1800 profit ($2400, less $625 tax) and enjoy it with a clear conscience that you haven't created possible future problems.

Depreciation

I am in the midst of selling a residental property. I rented rooms to students for a few years. My understanding is I will have to add any depreciation I have taken in the past to my basis. Also, even if I DID NOT take the depreciation when allowable, I will still still have to take the amount of depreciation allowable and add that amount to my basis.

Am I misinterpreting something here??

It looks like I am looking at a tax liablility I don't need. What if he really doesn't pay me anything and he just said that to lower his support payments, can I still be held accountable?

If you received no payments, then you have no rental income or expense. You are not accountable for what someone else says. You are accountable for income ONLY IF YOU RECEIVE IT.

Look in IRS Publication 527 for the section titled "Not Rented for Profit", which I believe probably applies in your case. In this situation, you simply report the not-for-profit rental income on line 21 ("Other income") of Form 1040. You continue to deduct your mortgage interest and property taxes as Schedule A deductions if you itemize. You don't have to mess around with depreciation, and rental expenses are only deductible up to the amount of rental income along with other miscellaneous itemized deductions subject to the 2% of AGI limit.

thanks!!

thanks everyone for your help. and yes halket, i also do my own taxes every year and believe you me, i am also very proud of that! it's sad to think we have gotten so afraid of the irs or making any mistakes re: private transactions that are really no one's business. it seems to have gotten so out of hand. maybe we need a revolution to set things right. hhmm, seems like i heard that we had already had one of those. thanks again.

Life Estate

we have a property in san francisco,ca that was turned into a life estate by my wife's uncle in 1982. at that time she was named on the deed. the uncle passed away in 1997 and the city is now using an "escape assessment" to raise the property value to 1997 values along with an accompanying $12000 tax bill! shouldn't the value revert to 1982 value not 1997? Does anyone know?

Pacrats:
I suggest you start your own thread with your question so that you don't dilute the thread already in discussion.