One effect of the recession was the large number of Americans who were forced to alter their living arrangements by moving in with relatives and others in order to make ends meet. For those who have been collecting rent from younger family members and other tenants during the recession, that money must be reported as income during filing season.
Recent data from the Mortgage Bankers Association shows that 1.2 million households disappeared between 2005 and 2008, in many cases because younger Americans were moving back in with parents in response to economic difficulties.
The MBA also notes that rental income is any payment received for the occupation of use or property, including advance rent payments, security deposits and money paid for canceling a lease.
Elsewhere, the Internal Revenue Service reminds landlords that any services or other work provided in place of rent payments are also to be reported as taxable income. For example, if a person offers to paint a room in exchange for a discount on the rent, that work must be reported at its fair market value.
For people who may have only recently welcomed family members back into their home, talking with a skilled tax preparer is the best strategy if they are also collecting rent.
Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.