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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28082
Experience:  Taxes, Immigration, Labor Relations
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A friend of mine has been staying with me months and

Customer Question

A friend of mine has been staying with me for 6 months and paying $600.00 per month to help with my monthly expenses. She is moving out soon. Will I need to report these payments from my friend as income or are the payments properly classified as gifts?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.
What is considered a gift?Any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money's worth) is not received in return.So based on your information - that is not a gift.If a friend simply pays her share of ongoing expenses - that woudl not be your income.But if she pays for rending - that is your income and should be reported on your tax return.I assume that is a not for profit rental - correct?.Please use for reference following IRS publication - see page 16 - Not Rented for Profit.http://www.irs.gov/pub/irs-pdf/p527.pdfWhere to report. Report your not-for-profit rental income on Form 1040, line 21. For example, you can include your mortgage interest (if you use the property as your main home or second home), real estate taxes, and casualty losses on the appropriate lines of Schedule A (Form 1040) if you itemize your deductions. If you itemize your deductions, claim your other rental expenses, subject to the rules explained in chapter 1 of Publication 535, as miscellaneous itemized deductions on Form 1040, Schedule A. You can deduct these expenses only if they, together with certain other miscellaneous itemized deductions, total more than 2% of your adjusted gross income.
Customer: replied 1 year ago.
It's not for profit rental. The situation was that the friend needed a place to say and offered to give me money to help with my monthly expenses while staying with me. I'm confused as to what paying her share of ongoing expenses means.
Expert:  Lev replied 1 year ago.
Based on your information - it doesn't look as you run that activity with intention to make a profit.Regarding shared expenses - please consider following illustration example - assuming you share dwelling with your friend and agree to share common expenses. Assuming you had $300 in monthly utilities and another $300 in food costs - total $600 in common expenses that you agree to split equally. So if in this situation your friend contribute $300 to cover such common expenses - that is not your income.However - when your friend gives you the money in exchange for the place to stay - that is your rental income.

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