My roommate paying me for the room, is considered income?

Question

When I will be renting a room or basement in my house (that I will be buying as primary residence), I’m planning for the roommate to just zell me the monthly rent directly to my back account. Are this funds taxable, do I have to declare them as extra income on my taxes. What’s the legal way to collect payments from roommates that live with me in the same house?

John Morgan · Answer

@Natalia Davis

I’d just keep it simple and collect cash.

Basit Siddiqi · Answer

Receiving payment in exchange for space is considered income.The good thing is that you likely have expenses to offset the income.Best of luck

Alecia Loveless · Answer

@Natalia Davis I believe Zelle and Venmo and such platforms now have to keep track of payments beyond $600. But it may be a different metric. The government and IRS got wise to landlords taking these direct payments and not reporting them.

I’m not an accountant and this isn’t legal advice but if you’re renting a portion of your property likely you can deduct something off your taxes to help offset the income from the rent. But be sure to ask your accountant this question.

Sean O'Keefe · Answer

Yes

Matt Devincenzo · Answer

Here is a past post describing the way to handle this.

https://www.biggerpockets.com/forums/51/topics/393996-how-to-best-handle-boarder-income

Natalia Davis · Answer

Thank you!

Kevin Sobilo · Answer

@Natalia Davis, yes that is income and subject to income tax. Almost all money you are paid is income anymore with only a small number of exceptions such as small amounts of money from a hobby.

You can collect the money in many ways, I have tenants pay using secure ACH transfers using apartments.com

I would declare this income because later on you may need the documented income to qualify for loans etc. Real estate investment relies heavily on loans and if you can't get good loans its hard to grow.

My roommate paying me for the room, is considered income?

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