My brother in law built a tiny house on wheels on my property. He has been here over 3 years. His home is completely contained, he has a space to cook, clean, sleep. The only thing his home does not have is a shower/toilet.
Now, he has everything he needs to complete his bathroom space. He just hasn't done it.
He works for himself (approx 25hrs a week, according to him). He is single. He currently does not pay me rent, and the only thing he pays me for is a portion of the electric. We are on a well, so he doesn't pay for water.
I have not charged him rent for various reasons, one being the idea that he would be using his income to complete his home, once that was done he could take it and move anywhere he pleased.
Another reason was, I wasn't sure how to handle the possibility of rent as income, like for tax purposes.
At what point does rental income become income? Can I charge him also for a portion of the taxes I pay on the property? And not have it count as taxable income? Is that fair? Or part of the lands insurance? We are lucky enough to own our home outright due to wise choices we made when we where younger, but we also make under 50k a year.
I don't look to actually make money off him, but it would definitely ease things up if I could charge him a little of the taxes or something.
Thanks all!
Brother living with me, how to handle 'rent'?
byu/karriwitchet inpersonalfinance
Posted by karriwitchet
20 Comments
I mean an adult conversation would do you well. I think having him pay part of the insurance/taxes is reasonable no doubt. If he’s okay with it draft up an actual lease type agreement and itemize it imo. Not legal advice but it’s just where my head is at
Matrix kicking in, He Must Pay! No Natural Free living allowed !
I would just consider proportionally what he actually uses. Utilities and land cost. I would probably consider sharing utilities, a portion of the property taxes (minus the taxes on your house), and shared land insurance if it’s just the land. Essentially exclude anything involving your home, and just share anything that you both use. I think that’s perfectly reasonable. Maybe split the cost of well maintenance and such as well.
I’d assume all income is technically taxable. Any thing less than market rent would be more than fair. I’d tell him since his place is done you’d like him to start paying rent and ask him to propose the rental amount.
Does your county add his structure to your property taxes? Where I am they might see this as an improvement and adjust property taxes accordingly.
I think having a sit down to see what his timeline is. Set expectations and mention what your concerns are.
3 years is certainly generous, were you planning on sharing your lot with his tiny home for the inevitable future?
Also, is this your brother in law or just your brother? You mentioned he’s single and that part is confusing. Did your sister pass?
Sorry just curious and thoughts to consider when approaching this. I lived with my brother growing up (last two years of high school) and I paid him rent, we split bills (water/waste, cellular, cable/internet), but at 1/3 instead of 1/2.
If you’re both adults about it, an interesting place to start the conversation would be asking what distribution of expenses he would consider fair if your roles were reversed.
Are you frustrated by the bathroom thing? It kinda sounds like you’d prefer he finish his own bathroom and quit using yours. You could address just the bathroom thing as “hey i’m starting to feel resentful of this and one way we could fix it is if you paid me $x/month to keep using this part of my home”.
If he moved his tiny house anywhere else, would he have to pay lot rent or site rent? Talk about what his other options are, and you can probably find an arrangement that costs him less than anything else he could be doing, while also compensating you more than 0 for the use of your land.
For insurance, make sure “the land’s insurance” actually covers his stuff if you want him paying for it. He may need to get renter’s insurance or vehicle insurance for the stuff that’s his.
One way of addressing the question of taxes would be to have him chip in to your cash expenses for an amount equivalent to the amount of the property tax he should be paying. Like if you think he should be paying $500/year toward taxes, you could have him pay your first $500 of grocery bills each year in cash and then call it even.
Site rent, formal lease with some delineations for him using your amenities might be a good place to start.
Its not income if he’s contributing to a portion of the bills you’re already paying.
Before you do anything you need to find out what’s legal in your city/county as far as tiny homes on your property. You may be required to do any number of things including paying more in taxes, etc. That info will guide you along.
Oof, yeah, this is one of those reasons I always recommend people draw up leases, especially with family.
Honestly, this is a pretty common pattern I’ve seen with tiny homes. People get to a certain point in construction and lose motivation/time/interest/money to finish the original intended project. Right now he has no motivation to finish the bathroom – he has a free solution that works for him.
I’d sit down with him, explain the situation, and give him a friendly, written 60 day notice (not sure what laws are where you live, I am not a lawyer) – if he hasn’t finished his project and moved, you’ll need to start charging some nominal fee. Right now, he’s probably technically a roommate since he has use of the house and the house’s bathroom. I think (you should confirm this) that tiny homes are essentially mobile homes, so you may want to start there to figure out rental costs. You may want to also look into zoning and find out if he can technically legally live there in a mobile home.
As for taxes, I’d ask a tax professional – it’s a pretty common situation, I don’t think it will be challenging to figure out.
Sounds like a conversation that should have been had before he started building.
At this point I’d try to find the market value of this arrangement and give him a deal if you are happy with him living there. Higher fee for bathroom use that can be reduced when he is finished with his tiny home.
I would avoid charging anything at first. I would make it clear what his plans are to become independent.
Unless this is what you want for a permanent situation, set the expectations of him completing the project and finding his own lot/place.
Once you start charging, you may be complicating your rights/responsibilities.
If the plan is for him to live on the property long term/forever…..then sure. But if this was supposed to be temporary, I think some hard timelines and expectations may need to be set.
Technically any surplus of income you make off his “rent” is considered taxable. I can’t imagine the amount being high enough where you’re going to get flagged or audited. I honestly wouldn’t worry about it unless you are an entrepreneur or self employed.
How much you wanna charge him is up to you. Personally, I’d probably charge him the amount you pay in property taxes a year, plus a little extra for you to set aside for repairs.
ok, I will ask, why do you let him live on your property? Living with your own family can be problematic sometimes, meaning your partner and kids, any other relatives and it will guarantee problems
Charge him a portion of the land tax and insurance, and a portion of the electric bill. Then charge him extra for the use of your bathroom and let him know that portion will be removed once he stops using it. Maybe that will light a fire under him.
You just need to have an honest conversation with him. It’s your land and your money going to utilities, etc., so you should not have to subsidize his lifestyle. I’d recommend coming up with what you think is a fair number, presenting it to him (in whatever way you think he will be most open to), and just explaining where you’re coming from.
If you start charging him anything beyond utilities it can count as rental income so you’d have to report it on taxes. Easiest route is to keep it framed as him splitting bills like electric water or even a share of property taxes if you want but don’t call it rent. If you do want to charge rent then just accept you’ll need to report it and handle it like any other landlord would.
Does your insurance company know he’s living there and if something happens to his home is it covered? I’d worry they will drop you if you don’t know or won’t cover it and then he sues you.
Just straight up tell him he’s been parked long enough that he’s used up your free goodwill, you’ll be charging $100 for the bathroom and $200 for the land use starting in 2 months.
You will need to report it if he asks for a contract.
Just because you’re on a well doesn’t mean water is free – There are costs associated with maintaining that system. Same with the septic system.
I’d be charging something trivial, like $100/month for the land rent. Then add a percentage of your electric bill and maintenance costs so you aren’t losing money from the increased maintenance requirements.