I live in a two-bedroom, two-bathroom condominium. Since my partner, who is also on the mortgage, moved out, I need a roommate in order to make ends meet. We are unable to sell due to a 10% market downturn. Between the mortgage and hoa dues, my roommate will be paying 25%, and sharing the condo equally (each having a separate room and bathroom with all other spaces shared as common spaces. It just occurred to me that if I must pay taxes on this payment, it will be a significant burden, based on the small amount I charge to rent the room.
Other information: I live in Seattle
Will my roommate be a tax burden?
byu/Necessary-Carob-7530 intax
Posted by Necessary-Carob-7530
6 Comments
Is 25% of the mortgage and HoA dues are Fair Market Value for renting a bedroom in a two bedroom condo in Seattle?
Rent is taxable income, yes. The question is if this is rent, or sharing of expenses. So far, it’s sounding like rent. Is this a friend or family member?
Well the partner needs to pay his part— because the partner wants their half of profits at sale.
What does your cohabitation contract say about this?
There might be a way to structure it so that it is shared expenses only The roommate pays for utilities, internet, repairs, insurance, food, taxes – anything that does not go to ownership of the house but comprises the ongoing maintenance expenses of the house. – you share the house with him, he pays for the current expenses and shares the benefits with you. If there is something wrong with this, the more knowledgeable people here will correct this.
When I was a renter, I always rented out a room to people and there was no income. Here, the main difference is that you own the home, but some of the expenses such as insurance, utilities, etc. are ongoing expenses that do not contribute to your “wealth.” All of these items would be deductible from any rental income anyway- at least half. Then you would also have to depreciate your house, and all of that gets more complicated. I doubt you are making much, if anything on this.
I don’t recommend that you have him contribute to the mortgage as that might cause him to have the idea that he partially owns your house, which is not a good plan.
If your partner owns 50% of the home and you were previously paying 50/50, sounds like they need to continue paying 50% and deal with finding the roommate, setting the rent, and any income tax implications. Not legally, but it’s what would seem fair since they would take 50% of any gain/loss at sale. I’d assume legally you’re probably both jointly and severally liable