Have Tax Questions? Ask a Tax Expert for Answers ASAP
A copy of your agreement with the organization sponsoring the student placed in your household,
A summary of the various items you paid to maintain the student, and
A statement that gives:
The date the student became a member of your household,
The dates of his or her full-time attendance at school, and
The name and location of the school."
Please ask if you need clarification or more information.
Thanks for your quick response. I have started looking at the IRS publications, but I had a few more questions.
We are receiving $800 per month for 10 months. I filled out a 1099 form for the organization and I know the amount is taxable, but I am tracking mileage for when we take our student somewhere. For instance, we took her to volleyball practice and picked her up. I am assuming a trip with just the student is deductible, but is a trip with the family to church or to a restaurant deductible if the student is with us?
Hello again, The basic rule is that you cannot include costs that you would incur in any event. Common examples would be insurance, repairs, taxes, or mortgage interest on your home. Similarly, a trip shared by the family would not be deductible as there is no additional cost just for the benefit of the student and would have been incurred in any event. The cost of her meal would be for her benefit. Many expenses will have to be prorated for the portion spent on the student such as food; since it is not practical or expected that you would keep her food separate from the family food. So, for five including here it would be reasonable to deduct one fifth of the food budget. The previously mentioned charitable deduction would only be possible for the amounts spent over which you were reimbursed.
Please continue to ask if you need clarification or more information.
Thanks for your quick response. I want to clarify, then. Since we are being compensated $800 per month, then we must report that amount as taxable income. Also, if I understand correctly from "IRS Publication 526":
Reimbursed expenses. If you are compensated or reimbursed for any part of the costs of having a student living with you, you cannot deduct any of your costs.
...then we could only deduct any expenses that go over the amount we are compensated. That being said, if we were to track transportation, percentage of food and utilities (25% based on our family--4 including our student), then we would only be able to take $50 per month if expenses were over $800 per month.
I just want to make sure I am clear on this as we go forward...