Finance

Have finance questions? Ask a financial expert online.

Ask an Expert,
Get an Answer ASAP!

I live in California and am considering renting or

Customer Question
Hi Pearl, I...

Hi Pearl, I live in California and am considering renting or exchanging a room in my home in exchange for house sitting, dog sitting and very minor help around the house. We travel a lot and sometimes are gone for months. I am trying to verify what the IRS or State of CA implications are for this type of rental vs. work exchange.

Submitted: 4 months ago.Category: Finance
Show More
Show Less
Ask Your Own Finance Question
Answered in 24 minutes by:
3/19/2018
Financial Professional: socrateaser, Attorney replied 4 months ago
socrateaser
socrateaser, Attorney
Category: Finance
Satisfied Customers: 40,064
Experience: Retired
Verified

Hello,

I am a member of the State Bar of California, the U.S. Tax Court and I am a licensed real estate broker.

Federal tax law would treat the value of the services from the tenant as fair market value rent, and you would be expected to report that fair market value as taxable rental income.

There is, however, a collateral issue: under California law, your tenant could be deemed your employee, and if the tenant were to complain to the California Employment Development Department (EDD), you could find yourself being held liable for failure to remit payroll taxes (withholding, FICA, Medicare, unemployment, SDI, etc.), and for failing to follow the requirements of the California Labor Code, by failing to pay at least minimum wage to the "tenant."

The point here is that you need to have a written lease agreement that clearly describes the terms of the rental, and you probably should pay the tenant as an employee. If you do not do both, you could find yourself with the most expensive problem you could possibly imagine.

I'm not trying to scare you off from your idea -- but, I have had numerous clients who believed that they were doing a "good deed" for someone who needed a place to live, only to find out later, when the relationship soured, that the former tenant/worker hires a lawyer and sues for $25,000 or more in unpaid wages. So, please be careful, if you choose to try to barter work in exchange for a room.

I hope I've answered your question. Please let me know if you require further clarification. And, please provide a positive feedback rating for my answer (click 3, 4 or 5 stars) -- otherwise, Justanswer retains your entire payment, and I receive nothing for my efforts in your behalf. Note: If you cannot find the rating button on your webpage, please just type in your rating in a response to this note, and customer service will apply the rating for you.

Thanks again for using Justanswer!

Ask Your Own Finance Question
Customer reply replied 4 months ago
That is exactly what I rhought, but wanted to verify. So, I should have them keep a log if any work done, and pay a separate payroll CK, and have them pay rent. Correct?
Customer reply replied 4 months ago
min wage is $11.00 in California? Placer county? And, that meets Fed guidelines also? Can you pay any less, like the old days, if meals and room are included?
Financial Professional: socrateaser, Attorney replied 4 months ago

IWC Order No. 15, Section 10, provides the reduction in wages permitted for a live-in household worker. The Order provides substantially all of the requirements of employment, albeit, not in a particularly user-friendly form.

Here is a link to the current minimum wage notice.

Hope this helps. Thanks for using Justanswer!

Ask Your Own Finance Question
Financial Professional: socrateaser, Attorney replied 4 months ago

Notes; It's the employer's obligation to track hours. You can have the employee sign a log of hours worked, but if the employee is lax in tracking their activities, then your only recourse is termination.

Also, you may need to obtain workers' comp insurance. Talk to your insurance agent.

Thanks for using Justanswer!

Ask Your Own Finance Question
Financial Professional: socrateaser, Attorney replied 4 months ago

Hello again,

I see that you have reviewed my answer, but that you have not provided a rating. Do you need any further clarification concerning my answer, or is everything satisfactory?

If you need further clarification, concerning this matter, please feel free to ask. If not, I would greatly appreciate a positive feedback rating for my answer (click 3, 4 or 5 stars) – otherwise, Justanswer retains your entire payment, and I receive nothing for my efforts in your behalf. Note: If you cannot find the rating button on your webpage, please just type in your rating in a response to this note, and customer service will apply the rating for you.

Thanks again for using Justanswer!

Ask Your Own Finance Question
Was this answer helpful?

How JustAnswer works

step-image
Describe your issueThe assistant will guide you
step-image
Chat 1:1 with a financial professionalLicensed Experts are available 24/7
step-image
100% satisfaction guaranteeGet all the answers you need
Ask socrateaser Your Own Question
socrateaser
socrateaser
socrateaser, Attorney
Category: Finance
Satisfied Customers: 40,064
40,064 Satisfied Customers
Experience: Retired

socrateaser is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Rakhi Vasavada

Rakhi Vasavada

Financial and Legal Consultant

2,609 satisfied customers

Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years

Megan C

Megan C

Certified Public Accountant (CPA)

2,222 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

Manal Elkhoshkhany

Manal Elkhoshkhany

Tutor

1,933 satisfied customers

More than 5000 online tutoring sessions.

JKCPA

JKCPA

CPA

844 satisfied customers

Bachelors degree and CPA with Accounting experience.

Eric

Eric

Financial Manager

559 satisfied customers

Loan servicing, counseling and real estate expert. Foreclosure Expert and Financial Planner.

R. Klein, EA

R. Klein, EA

Accountant

480 satisfied customers

TurboTax Expert. QuickBooks Certified Pro Advisor

Dimitry K., Esq.

Dimitry K., Esq.

Attorney

332 satisfied customers

NASD Licensed Rep, 1997-2001, Business Attorney

< Previous | Next >

Related Finance Questions
My wife and I want to pay off 100k in debt and so we can buy
My wife and I want to pay off 100k in debt and so we can buy a home within the next 2 years. We currently live in California and think that maybe moving to a state with no income tax will help more. W… read more
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
2,467 satisfied customers
I am starting a business and trying to decide the best
Hi, I am starting a business and trying to decide the best corporate structure, s- corp, llc, etc. Can you help me? … read more
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
2,467 satisfied customers
I'm considering the idea of leaving my house in arizona to
Hi there,I'm considering the idea of leaving my house in arizona to travel abroad long-term.I'd like to turn my house into a rental.I have 3 rooms available to rent for 3 occupants in the house.The to… read more
TaxRobin
TaxRobin
Vocational, Technical or Trade School
1 satisfied customers
For a state residency test, if a person rents an place in
for a state residency test, if a person rents an place in Los Angeles and works for a company in Los Angles, that assign him to work out of country and he travels outside the country and 25 percent of… read more
TaxRobin
TaxRobin
Vocational, Technical or Trade School
1 satisfied customers
Nice to meet you!!, So I have a property in modesto, ca that
Hello Pearl, Nice to meet you!!, So I have a property in modesto, ca that I will be renting out in July or August, cause I currently took a second on it to help pay the down payment on the new house I… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I own am a resident of Ohio/Vote/Pay RE taxes there and I
I own am a resident of Ohio/Vote/Pay RE taxes there and I was sent to CA for a 6 month work assignment that was extended to 1 year for a company I joined back in March 2016. For tax purposes does that… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,327 satisfied customers
I live in California, but own a rental property oin
Good morning I live in California, but own a rental property oin Maryland. I am now looking to sell it. what can I expect with Federal Tax laws and CA tax laws? … read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,327 satisfied customers
I have a client who owns a commercial building that has
I have a client who owns a commercial building that has office space for rent as well as they rent it out for events. Is this all considered rental income reportable on Form 8825 on a partnership retu… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
In a few days I'm moving to the Netherlands to work company
In a few days I'm moving to the Netherlands to work for a company there as a US expat. I currently live in CA and just found out CA charges residents on their global income at full rate. I'd like to try to avoid that if possible. I'm from Portland, OR, where my folks still live, and I'm considering going up tomorrow to quickly establish residency (get a driver's license, register to vote, change all my bank and mailing addresses to my folks' address, basically move in with them before I leave for the Netherlands) … read more
Barbara
Barbara
Enrolled Agent, Paralegal
5,433 satisfied customers
Business Expense Question - I have a question regarding how
Business Expense Question - I have a question regarding how to categorize hotel and rent expenses. My husband and I inherited a corporation after my father-in-law passed away that is located in a diff… read more
Megan C
Megan C
Certified Public Accountant (CPA)
Master's Degree
2,222 satisfied customers
Mortgage eligibility question My wife and I show a gross
Mortgage eligibility question My wife and I show a gross income of just under 40,000 with a net income of about 17,000 after extensive write offs, as I am self employed and write off a lot. I've been … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Hi. We have purchased a home and are renovating the house,
Hi. We have purchased a home and are renovating the house, which is a permanently affixed mobile home. We have a rental house right behind the one we just bought. The man who rents the house behind th… read more
Rakhi Vasavada
Rakhi Vasavada
Financial and Legal Consultant
Bachelor's Degree
2,609 satisfied customers
Hey Lev,I am being moved from California to Arizona for
Hey Lev, I am being moved from California to Arizona for 11 months by my company to work on a project. The company is offering to pay my rent and utilties for my temporary housing in Arizona while I a… read more
R. Klein, EA
R. Klein, EA
Accountant
Master's Degree
480 satisfied customers
My husband and I have 6 rental properties 1 furnished and 5
My husband and I have 6 rental properties 1 furnished and 5 unfurnished. I complete our tax returns and need to nowif there are any allowances that I should be using to reduce our tax liability. I kno… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Hello, Not really a tax question but I figured I try it
Hello, Not really a tax question but I figured I try it anyway. I am living overseas but thinking to return to the USA in the next 6 months- year and considering buying a new home in the 200-300k rang… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
Background: - In 35% tax bracket - Home mortgage is 197K
Background: - In 35% tax bracket - Home mortgage is 197K assessed at 575K @ 3% for next 3 years (Virginia) - Rental house mortgage is 278K @5.5%; rent covers all monthly costs; assessed at 365K (rent … read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
Real Estate / Finance topic Unfortunately, this ...
Real Estate / Finance topic: Unfortunately, this one's not as much black and white but, more so in the gray area...... I currently own a house in Melville, Long Island (no mortgage; debt free; market … read more
The Geezer
The Geezer
Master's Degree
120 satisfied customers
My wife and I purchased a home as an investment to flip in ...
My wife and I purchased a home as an investment to flip in a old, but upscale neighborhood in the Pgh. PA area in Nov. 05'. We put 40k into upgrades and could not sell it so we aquired a tennant on a … read more
Dave Z
Dave Z
Self-Employed
Bachelor
418 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x