Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Currently I am living in my mother's home (with my mother). I am paying rent to her as she is technically my landlord. How will this affect her taxes when she files? I imagine she would have to claim it on her yearly income...
Please help! She is a worry wart to say the very least....
My opinion is I wouldn't worry about it. You won't be filing a form with the IRS so they won't know about the extra income. I believe the tax laws will require her to pay income on it but she can also expense out the expenses she has.
But the money is virtually untraceable and I honestly wouldn't worry about it.
If your mom did declare the income, it would be a tax benefit because a certain percentage of the house is the rental space, including those parts of the house you use other than your room,so expenses like heat, water bill, and paint would be deductible from the inome, even food if that is provided. And landlords get to deduct the purchase price of the home divided by 27 1/2 for depreciation....still, as the last poster stated, it's probably not necessary.
Don't report it. It will open a can of worms to deal with. She may lose her homstead exemption or part of it. she have to offset expences, utilities, depreciation, property tax etc, against the income. just do not do it.
I am a CPA and would suggest she speak with one. I don't specialize in tax otherwise I would answer the question specifically because there is a lot of gray area here. If you don't want to pay $$$ for advice, you can use something like bidawiz.com to get the question answered pretty inexpensively to put her mind at ease. Or just google it or go to irs.gov and search on the topic. But Ira is very close to being correct. The problem comes when you are no longer renting from her...converting it back to 100% her property as she may potentially have to recapture some of the expenses she wrote off. And yes, it is an ugly scenario if the IRS got a hold of it so I can see why she is concerned. Whether or not they would ever find it in an audit is another issue...in fact, reporting it may trigger an audit. Ultimately depends on if your mom is a "rule follower" and can't rest until she knows she is doing it right. But IMO, CD is not the place to go to seek tax advice. LOL.
Last edited by texastrigirl; 12-14-2009 at 08:20 PM..
Reason: add
i agree, that depreciation we can take is no bargain, its usually recaptured later on anyway. its usually recaptured also just at the worst time too, when you sell to retire and move .. having to pay back all that tax money can be quite a surprise if your not aware thats how it works.
the big danger too is you have to pay back that depreciation even if you bothered to never take it all those years.. that really stinks.
whether you take it or not irs rules say it gets paid back.
I don't consider that a child living with a parent is paying reportable 'rent' but rather is contributing (sharing) expenses unless it's a separate unit.
i agree, that depreciation we can take is no bargain, its usually recaptured later on anyway. its usually recaptured also just at the worst time too, when you sell to retire and move .. having to pay back all that tax money can be quite a surprise if your not aware thats how it works.
the big danger too is you have to pay back that depreciation even if you bothered to never take it all those years.. that really stinks.
whether you take it or not irs rules say it gets paid back.
I am a CPA and would suggest she speak with one.... But IMO, CD is not the place to go to seek tax advice. LOL.
Of course not. 10 out of 10 CPAs would prefer that you hire one rather than try to find the answers on your own. Hire a CPA just to figure out if you need to pay taxes on maybe 6000 income? It'd be cheaper just to pay the taxes than the hire the CPA to tell you if you have to pay them.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
