Must I Report Income?

Forum|Forum|3 years ago
September 6, 2022
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I am about to purchase a home in CT and am trying to determine if I will be required to report rental income. The home will be my primary residence where I will reside 365 days a year, I plan to rent out a room to a friend including writing them a lease agreement so that they are protected under "renters laws" in case any unforeseen issues arise. The rent of the room will not generate a profit, instead it will just help me offset my cost of living by sharing my mortgage and other expenses with the friend as a "room mate". Would I need to report this as income?

Would it make a difference if the room mate was utilizing an in-law portion of the home as opposed to occupying a room in the main house?

Does writing a formal lease agreement change things?

Carl11_2

Employee

If a formal lease agreement exists, then you are required to report the income. Otherwise, you could treat it as a cost sharing arrangement assuming there is no monetary gain/profit.

If you are in a state that offers a renter's credit on state taxes and the tenant wants that credit, then they are entitled to it. Since the amount of the credit is based on the rent they pay, that means the recipient of that rent is expected to report the income weather they actually profit from it or not.

In the state of Hawaii, all landlords are required to be registered, even if only renting out a room in your primary residence. This is where the determination of actually "renting" out a room, or having a cost sharing arrangement can really matter on the legal front.