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Sharing Expenses
12.29.10 | chickensoup

Posted on 12/29/2010 5:04:59 PM PST by Chickensoup

I am considering roommates to share expenses. I own a house and have a small mortgage. I have room for up to three roommates. I am told that if expenses are shared it is not income. I expect to pay the mortgage out of my own pocket. If someone paid the taxes, and others paid the insurance and other expenses would it be considered my income? I have not been able to find an answer.


TOPICS: Business/Economy; Miscellaneous
KEYWORDS: chat; roommates; vanity

1 posted on 12/29/2010 5:05:05 PM PST by Chickensoup
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To: Chickensoup
Try typing "if someone else pays your expenses is it income to you" into an Internet Search Engine, like Google, Bing, etc. Here is an interesting site: http://www.googobits.com/articles/p0-1440-how-residential-rental-income-is-taxed.html
2 posted on 12/29/2010 5:11:51 PM PST by SubMareener (Become a monthly donor! Free FreeRepublic.com from Quarterly FReepathons!)
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To: Chickensoup

if they give you financial consideration in return for lodging, then it is income to you ... better consult a CPA about how to do your taxes and how to apportion your expenses and deductions and make sure the renters dont try to take deductions they are not entitled to take. You may be forced to depreciate part of your property ...ask a good CPA. You may also have to meet some local ordinances about rental property


3 posted on 12/29/2010 5:12:51 PM PST by silverleaf (All that is necessary for evil to succeed, is that good men do nothing)
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To: Chickensoup

Rent is income and taxable, but you need to be aware of all the tax issues surrounding this venture so you don’t pay more taxes than needed and you are also following IRS rules about turning a primary residence into a rental property. Best to talk to your cpa if you have one.


4 posted on 12/29/2010 5:16:42 PM PST by Kirkwood (Zombie Hunter)
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To: Chickensoup

Sounds like a scam and that’s probably the way the IRS would look at it.

If the taxes, insurance and expenses are in your name I doubt that it matters who “pays” the bill because you are the one who is legally benefiting. Sounds like income.

If it looks, acts and quacks like a duck....


5 posted on 12/29/2010 5:16:42 PM PST by O6ret (for)
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To: SubMareener

I did and didnt find much.

If your best bud or girlfriend moves in with you, and they share expenses, is it income to you?


6 posted on 12/29/2010 5:18:28 PM PST by Chickensoup (I am no longer Republican or Democrat, I am Conservative.)
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To: Chickensoup
I believe it would be Income. The taxes and insurance should be in the mtg. payment that you make.

You would be able to have a deduction for the upkeep of that home, based on the sq. ftg. the tenants are using.

Get enough rent to pay for all of the utilities. Check with you ins. co. to see if the tenants property is covered under you homeowners, or they may need to get tenants insurance.

Make sure you spell everything out in a good lease.

7 posted on 12/29/2010 5:19:07 PM PST by annieokie
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To: silverleaf

What if they dont give it to me, what if they pay their portions of the bills.


8 posted on 12/29/2010 5:19:12 PM PST by Chickensoup (I am no longer Republican or Democrat, I am Conservative.)
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To: O6ret

If your girlfriend moved in and you both split expenses, would it be income to you?


9 posted on 12/29/2010 5:20:14 PM PST by Chickensoup (I am no longer Republican or Democrat, I am Conservative.)
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To: O6ret

If your girlfriend moved in and you both split expenses, would it be income to you?


10 posted on 12/29/2010 5:21:54 PM PST by Chickensoup (Protecting US interests ONLY if US interests move back into the States and give US citizens jobs.)
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To: Chickensoup

“If your best bud or girlfriend moves in with you, and they share expenses, is it income to you?”

Yes. No different than renting out space to a stranger.


11 posted on 12/29/2010 5:23:00 PM PST by Kirkwood (Zombie Hunter)
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To: annieokie

The taxes and insurance should be in the mtg. payment that you make.

No it isnt.

I dont want to rent.


12 posted on 12/29/2010 5:23:27 PM PST by Chickensoup (Protecting US interests ONLY if US interests move back into the States and give US citizens jobs.)
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To: Chickensoup

Rent is income, but share expenses are not income, according to my wife, the Enrolled Agent Tax Professional. She recommends a set level of contribution to household expenses, rather than having one person pay the taxes, another pay the insurance, and others the other expenses. Thus, all of the money goes into a single, shared pot to cover all expenses. That requires a detailed budget and careful disbursing from the shared pot. This arrangement will pass muster with the IRS as shared expenses and not rent. Thus, it will not be income for any of the residents.


13 posted on 12/29/2010 5:24:54 PM PST by agedav (the aviation theologian)
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To: agedav

That is what I am looking for. Is there a site or a booklet that can show me how to set this up or is this something that a CPA could show me how to do. I had heard of this previously but have not been able to find more information.


14 posted on 12/29/2010 5:27:30 PM PST by Chickensoup (Protecting US interests ONLY if US interests move back into the States and give US citizens jobs.)
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To: agedav

Thank you.


15 posted on 12/29/2010 5:28:01 PM PST by Chickensoup (Protecting US interests ONLY if US interests move back into the States and give US citizens jobs.)
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To: Chickensoup

Have you tried contacting Charlie Rangel? He knows all about that Tax Code thingy.


16 posted on 12/29/2010 5:34:59 PM PST by vwbug
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To: vwbug

I am trying my best NOT to be a Rangle.


17 posted on 12/29/2010 5:41:06 PM PST by Chickensoup (Protecting US interests ONLY if US interests move back into the States and give US citizens jobs.)
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To: Chickensoup

You should check with your local zoning inspector to determine how many roommates (unrelated to the property owner)may reside in a single family rated district.


18 posted on 12/29/2010 5:46:53 PM PST by mohresearcher
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To: Chickensoup

if someone else pays the taxes, then you cannot deduct those on your taxes, so it goes both ways
Yes, rental revenue is income, but you will also have some additional deductions you can claim
get a good CPA and do it right


19 posted on 12/29/2010 5:59:17 PM PST by cantbetooconservative (I miss Ronald Reagan)
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To: Chickensoup

http://www.irs.gov/publications/p17/ch09.html#en_US_2010_publink1000171702 Ask a CPA or call the IRS. The way I read it, is if you don’t charge rent and just share expenses then its not income..


20 posted on 12/29/2010 6:11:38 PM PST by EVO X
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To: Chickensoup

I have a similar situation. I own the house and have 3 roomates. H&R Block said that because I own the house everything the roomies spend on expenses is income to me. Of course, I then get to take those expenses off my income tax, which is good as I have way too much withheld.

I own a 2d house filled with tenants who have roomies. The money they get from their roomies is not income for them because they do not own the house.

I’m not an expert on this. I’m just telling you my situation. It is unfortunate that taxes are so onerous that decisions have to be based on gaming the complexities of the tax code. We need a flat/fair tax for the sole reason that economic decisions will be based on what is most productive and not on the tax code.

My personal recommendation is to rent to roomies. At least in IL the rental and roomie market is very strong. Another personal recommendation: Alcohol/drug use is the #1 filter to avoid bad tenants/roomies. #2 is people who not on the government dole. Rooming with a drinker or parasite is not worth the hassle.


21 posted on 12/29/2010 6:13:08 PM PST by spintreebob
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To: mohresearcher

I did, no issue so far.


22 posted on 12/29/2010 6:15:40 PM PST by Chickensoup (Protecting US interests ONLY if US interests move back into the States and give US citizens jobs.)
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To: mohresearcher

I did, no issue so far.


23 posted on 12/29/2010 6:15:45 PM PST by Chickensoup (Protecting US interests ONLY if US interests move back into the States and give US citizens jobs.)
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To: spintreebob

You also have to depreciate the house if you have tenants...which is not a good thing if you plan to sell.


24 posted on 12/29/2010 6:17:17 PM PST by Chickensoup (Protecting US interests ONLY if US interests move back into the States and give US citizens jobs.)
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To: Kirkwood
Yes. No different than renting out space to a stranger.

Nope. My wife is an accountant. She says that it was a gray area that the IRS almost always overlooked back 30 years ago, (and in the case of a lease as long as both parties were on it, the law didn't apply) but now, with "domestic partner" legislation, it's a moot point, even with only one person on the property deed and mortgage (although obviously only the person on the mortgage can claim the deduction.)

25 posted on 12/29/2010 6:54:29 PM PST by buccaneer81 (ECOMCON)
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To: Chickensoup

Make them put up a hefty deposit. Good luck, you’ll need it


26 posted on 12/29/2010 6:57:08 PM PST by Figment ("A communist is someone who reads Marx.An anti-communist is someone who understands Marx" R Reagan)
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To: Chickensoup
"What if they dont give it to me, what if they pay their portions of the bills."

What if they decide they do not want to pay? or get two months behind and don't tell you?

ouch!

27 posted on 12/29/2010 7:12:10 PM PST by 1_Rain_Drop
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To: 1_Rain_Drop

These are people I know. I will collect the pool and disburse it. And keep good books.


28 posted on 12/29/2010 7:14:15 PM PST by Chickensoup (Protecting US interests ONLY if US interests move back into the States and give US citizens jobs.)
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Comment #29 Removed by Moderator

To: buccaneer81

Your wife is mistaken snd not a very good accountant. Income is income and it is taxable. There is a big difference between simply sharing living expenses, insurance costs, or taxes (which are not income to the homeowner) and sharing the cost of the mortgage on a single family residence (which is income to the homeowner). The IRS does not take kindly when someone tries to hide income by calling it living expenses. You would have to be able to document true costs for everything, which could be a problem if you are not good at record keeping. Lots of tax penalties if you are caught earning income and not disclosing it. I would never advise someone to just ignore their potential liability on taxable income. I would advise them to know all of the legal issues before renting out parts of their home, even to a friend. They also better discuss this with their mortgage company, because they could be violating their contract. They also need to know local ordinances about multifamily homes.


30 posted on 12/29/2010 10:06:02 PM PST by Kirkwood (Zombie Hunter)
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To: Kirkwood
You specifically mentioned a live-in girlfriend, not a traditional roommate scenario. Again, I refer you to domestic partner laws of the last decade. It's not income under those circumstances.

I'll put my wife's 20 years of accountancy up against your opinion any time.

31 posted on 12/29/2010 11:44:05 PM PST by buccaneer81 (ECOMCON)
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To: buccaneer81
Again, I refer you to domestic partner laws of the last decade. It's not income under those circumstances.

After rereading her posts, she clearly wants to do it for income(all costs except small mortgage paid by one or possibly others)

32 posted on 12/30/2010 5:01:58 AM PST by EVO X
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To: EVO X

I know, but as an aside, Kirkwood raised the question of a live-in romantic partner. That’s what I was addressing.


33 posted on 12/30/2010 12:34:41 PM PST by buccaneer81 (ECOMCON)
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To: buccaneer81
I know, but as an aside, Kirkwood raised the question of a live-in romantic partner. That’s what I was addressing.

For most people, I wouldn't think their would be any tax consequences. High rollers might have gift tax consequences if they get audited..

34 posted on 12/30/2010 4:32:21 PM PST by EVO X
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To: EVO X
For most people, I wouldn't think their would be any tax consequences.

That's what my accountant wife said.

35 posted on 12/30/2010 4:50:54 PM PST by buccaneer81 (ECOMCON)
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To: Chickensoup

If these three roomies are your domestic partners you have other problems.

But the simple answer is Yes, it’s income, especially if you are claiming the 1040 deductions for mortgage interest and RE taxes paid....for which you are being partially reimbursed.

Instead of trying to skirt the issue of tax liability why not simply acknowledge the roommate’s payments as rent which it really is and pay the taxes you owe?


36 posted on 12/31/2010 2:57:01 AM PST by O6ret (for)
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