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Old 02-02-2011, 08:36 AM
Statler2bc
 
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First time homebuy tax credit and roommates

I bought a house in 2009 and have since gotten a roommate to help with expenses. I still live in the house and my roommate (currently my sister) pays me for a bedroom. Is this considered "converting to a rental property"? Or is this still considered my "primary residence" since I live in the home? Do I file the income from the renter? Thanks.



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Old 02-05-2011, 11:25 PM
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“Is this considered "converting to a rental property"? Or is this still considered my "primary residence" “---->basically, it depends on the situation. what I mean is that legally, No. It is no longer your primary residence; the rent from your sister, roommate, is obviously your income to be reportable to the IRS, But technically, maybe it is not. Ask yourself this Question: How does the IRS find out if it is absolutely rental income or just your sister’s contribution to her family-member, you (i.e., gifts for her brother; your sister can give you up to $13,000 per year and the done, you, don’t pay any tax on it)? If you want to treat the rents from her as rental income, then You now have rental property (the area of the house that your sister rents). The expenses you pay towards the maintenance and upkeep of that property may now be deductible. And it will only be a pro rated portion of those expenses. But, at the very least, it could lower your income due to the rental. At best, the Schedule E (Supplemental Income and Loss) could show a Loss to your income, which can be a great thing in terms of reducing your AGI and Taxable income and tax liability. So definitely keep track of what she pays, but also of what you expend. Examples of expenditures are electricity, gas, water, new roof, and insurance. You also may need to pay self-employment tax or estimated taxes ( if your tax liability from rental business at least $1,000, I guess)
“since I live in the home? Do I file the income from the renter”---> It doesn’t matter I fyou have been living in the house; however, if you do not regard the rent from your sister, as said above, as your income ( but may regard it as a sort of gift or contribution from your sister), then your home is still your primary home; you do not need to file Sch E or etc.



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