Laws regarding renting out bedrooms of your home

[Steve Sonneson]

I live in Rockford Illinois and I plan on purchasing a property and renting out a couple of the bedrooms with a short lease and contract. I'm having a difficult time finding the correct information online regarding the legality of room rentals in my area. I've searched the topic a number of times and looked under Rockford zoning but I haven't had much luck. I did however read somewhere that any income from renting out your rooms is taxable and must be recorded. I don't know if that's true or not with your home. Any info pointing me in the right direction would be appreciated. Thanks

[Joe Splitrock]

Originally posted by @Jonathan Klemm:

@Steve Sonneson - There are likely not specific laws/rules written out in Rockford, I know here in Chicago there are specific Airbnb regulations but not rent by the room.

Definitely, by the book, you should pay taxes on rental income but as others mentioned take cash or Zelle and you'll be fine not claiming it.

 The Treasury Department has been focusing on Zelle, Venmo and other peer to peer payment systems relative to tax fraud. These platforms previously had a threshold of $20,000 or 200 transactions for reporting. They are trying to reduce this to $600. This is to crack down on unclaimed income. The administration is also looking to double the size of the IRS and increase audit frequency. The other piece in the news lately is forcing banks to report transactions as small as $600. All this information can be plugged into an algorithm and bam, people start getting letters from the IRS. There is a major effort underway so I think people need to be way more careful. 

Here is a detailed report from the Treasury Department studding P2P payment fraud. 

https://www.treasury.gov/tigta...