<p>We have two kids. One returned home after grad school, lived rent free with us for 6 months while job hunting.
Now employed, independent financially, and on his own.</p>
<p>Other child has and will live with us long term.
Limited income, earned and via SSI/SSD.</p>
<p>If we collect (modest) rent from her, must we report it as income on our return?
What have you done?</p>
<p>Ive studied the IRS documents online and turbotax help and still not clear.
We do NOT plan to claim deductions due to rental, ie not running this as business.
So, family member paying rent in shared primary residence…
I appreciate any thoughts.</p>
<p>I’ve been preparing income tax returns for 34 years and in that time have never seen anybody claim rent paid by a child. I see no benefit in doing so. Consider it not rent, but a sharing of expenses. </p>
<p>This child is permanently disabled. She may live with us “forever” or eventually move into a supported/group home.
Ive also posted this in more detail in the parents of disabled children thread. There are reasons to term rent as rent in these cases as it relates to SSI benefits. I posted here to get a larger, more general response on rent from children, especially pertaining to need to declare as income as the parent.</p>
<p>3bm, may I ask? How would you respond if a person said they DID receive rent from their child?
I think turbotax is telling me it is “other income” if we’re not renting for a profit, which we wouldnt be from what I’ve also read on IRS site.</p>
<p>Kandcsmom, because of our specific family situation, we are looking at all (legal) ways to secure our DDs financial future.</p>
<p>I looked into the specific SSI/adult child/paying rent to parents issue for a client and found it is being treated many different ways. I did not come to a clear resolution, at all. Neither the client nor I wanted to go down the Schedule E/rental route. If the child is paying a portion of the mortgage outright then I don’t feel the parents are entitled to the entire mortgage interest deduction.</p>
<p>At this point my client is having their adult child take SSI “hit”/reduction rather than taking rent. I believe they will go the “sharing expenses” route, but that gets murky too, since they take a home office deduction.</p>
<p>Parents can each gift their children $14,000 annually. So, I believe that you can legally give your child $28,000 total and then “deduct” the rent from that amount without having to claim it as income.</p>
<p>2018Eastorwest, than interesting plan for typical adult children, wont work in our special needs/SSI family.</p>
<p>Srystress, thanks for the useful feedback. Im actually happy that this isnt some obvious tax situaion that im too dense to grasp. We have no interest in adding a rental schedule to our return. We’re too careful to just not worry about reporting, which some might do.<br>
I think we’ll probably stick with the reduced SSI/no rent option for now.</p>
<p>It could be a problem if your daughter is getting an advantage by labeling it as rent, but you are not reporting it. If she were ever audited it could then trigger an audit for you. Seems to me like you and your daughter should both be treating it as rent, or neither of you treating it like rent.</p>
<p>You don’t get additional SSI payments. Rather, the disabled person’s SSI is reduced due to the fact they are receiving “free” housing.</p>
<p>I agree with KKmama that income/expense should usually be thought of as a “balanced” scale–if it’s expense to someone, it’s usually income to someone else. In this situation, a person who had only SSI as income wouldn’t be required to file a tax return. Therefore, their return wouldn’t be audited. Rent isn’t a federal tax return deduction anyway. Rent is a small deduction in my state, but again, SSI income wouldn’t require filing a state return. I’m just pointing this out; not advocating a tax position simply because the risk of audit probably does not exist.</p>
<p>KKMama, exactly.
DD would get increased SSI if we carge her rent. But if we charge her rent, then i believe we have to claim the rent as income to be in line with IRS rules. Not worth it to us to tempt an audit to do otherwise.</p>
<p>Mom2collegekids, DD would report/label it as rent to the SSI division of social security adminstration to qualify for increased SSI. We’d make out an official lase to substantiate her claim forbthat additinal benefit.
So, not possible for us to then not claim the rent as income on our return.</p>
<p>With typical kids where SSI is not involved, I can see that arrangements between family can be more casual concerning rent/shared housing.</p>
<p>Seems like my orignial question has been answered…if parents do collect rent, its likely not reported as income. I dont find that surprising at all. As I mentioned, we never charged son rent and if we had, i doubt it would have occurred to us that it was reportable income.</p>
<p>I’d be curious if any parents who charge some rent to kids who come home to live for a while after graduation put it on their income tax returns. My guess is that they do not.</p>
<p>Have read of a number of them saving the “rent” and gifting it to the kiddo when they leave the nest to help with the transition, security deposit, etc. In this way, it’s more akin to a forced savings than “rent.” Have heard of relatives doing something similar with what they charge for “day care” and “babysitting,” when the gift it towards the kiddo’s education later when there is tuition or college, etc. It really is up to the person who is performing the service or offering lodging, etc. whether they will collect and what it is called–contributions toward food and expenses vs. rent. If it’s contributions towards food and utliities, it’s not reportable anyway.</p>
<p>This query isn’t just about helping a kid save so they can have a bit more when they soon move out. The query isn’t about gifting it to a kiddo when they move out. This topic is collecting rent from a permanently disabled person, that the OP tells us will live there “long term” and may never move out(who knows?), specifically so the disabled gal can claim the expense and have greater taxpayer paid benefits(Much as post 9 says). I have rental houses, and whether or not the final tally is a profit or loss, I still have to show the income. You are not roommates. You are not both paying a fee to the property owner to live in the premises. The OP is putting themself in the position of (considering) becoming a LL by charging rent to a person who would be claiming they must pay rent.
I wish I could speak from a tax lawyers’ perspective, but I cannot. I can only speak as a parent, a menber of this online community and a U.S. citizen.
It seems to me that if a person with a permanent disability gets more benefits from taxpayers if they document they have the expense of paying rent, so they choose to itemize rent paid, then the one collecting the rent should be counting it as income. Somehow it doesn’t seem right to collect rent someone else has claimed as an expense, without claiming it as income. However, certain amounts of rent when claimed, may not count against the income earner.
I think of ot this way: If I(as a landlord) accept rent from a disabled person(I’m not related to) then must I claim that as income? Of course. The taxpayers give more to the disabled rent payer(and rightfully so imo), but the individual collecting rent income may owe a portion to the taxpayers. </p>
<p>As for me personally, when my young adult age son graduated, I put him in a rental home of mine for a few months at a huge discount. Essentially, the discounted portion is a gift to him that I was willing to give, but I still had to claim what he paid as income. And in his case, he wasn’t claiming rent as an expense to get higher taxpayer paid benefits.</p>
<p>You are saving taxpayers a lot of money by having your child under your roof and using her SS payments towards her care than if the state was her guardian and she recieved more financial assistance as an independent adult.</p>