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  1. #1
    mfronczak Guest

    Claiming a Roommate on Income Tax???

    Person A rents out part of his house to Person B. Person A ownes the property. Person B, who pays significantly less than market value for rent, has his own bedroom and Person A and B share the bathroom, living, basement, etc. Person A, who is good friends with Person B, does not claim the rent on any income taxes.

    Person B is having a great deal of financial trouble and is going to try and file for bankruptcy. However, in order to meet the "requirements", Person B wants to start paying Person A market value for rent, or about three times as much as they are currently paying. Person A wants to help, but is afraid of any tax penalties.

    1) Should any amount of rent be declared on income tax? Should Person A claim the smaller amount of rent as income?
    2) If Person B files for bankruptcy and declares his rent, will he have to list who he pays rent to? Bottom line, if he declares his rent, will it send up a red flad to the IRS to look at Person A?
    3) Is there anything else to know about taxes in terms of renters (in this case, roommates)?

  2. #2
    Join Date
    Feb 2002
    Legally, any rents received should be declared as income. You can deduct any expenses incurred as a landlord/roommate. If you pay the utilities, trash, lawnmowing, heat, etc, you could deduct 1/2 off your rental income. You can deduct 100% of repairing your tenants room (repairs only, not remodeling). There are certain things you cannot deduct at all - cable TV for example is not considered a necessity. You should check your state tax codes, as your tenant may be deducting his rental payment on his own tax form.

    If I was in your shoes, I don't think I'd want to mess with the tax headache you are going to get. Especially since your tenant was paying a low rent.

    Although, you may be able to come up with enough deductions to actually claim a loss for renting a room, and get a bigger tax refund.

    I don't see how you can declare these things now, after not doing so. If you wish to start now, and you could make a decent profit, then keep every receipt and file your taxes legally.

    Make sure it is legal to rent out a room in your area.

    As far as the bankruptcy - I don't know. Hopefully someone else will come on here with advice on that!

    Good luck.

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