Can two separate families living under one roof both file as 'head of household'?

Thanks for the quick response! I'm a bit confused about the "pay more than half the cost of keeping up his home" part. Since he doesn't pay rent or utilities directly, would the childcare and maintenance work he does count toward that requirement? He probably spends about $800-1000 a month on food, clothes, and other expenses just for him and his kids.

The "keeping up a home" expenses include rent/mortgage, property taxes, home insurance, utilities, repairs, and food consumed in the home. While your ex-son-in-law doesn't pay rent directly, the IRS could view his childcare and home maintenance as a form of payment if there's a clear understanding that these services are provided in lieu of rent. The $800-1000 he spends monthly on his family's food and other necessities would count toward his household expenses. It would be helpful if you could document or estimate the value of the services he provides as a form of rent payment. If the total value of his contributions and direct expenses exceeds half the cost of maintaining his living space in the basement, he should qualify for HOH status.

Did taxr.ai help with figuring out how to value the non-cash contributions? That's the part I'm struggling with for my sister who lives with me but watches my kids instead of paying rent. How detailed did you have to get with documenting everything?

I'm always skeptical of tax tools - did they just give generic advice or actually look at your specific situation? And how did they handle the documentation part? Did you have to create some kind of formal agreement afterward?

They actually provided a calculator that helped me estimate the fair market value of childcare and maintenance work in my area. I just input the hours spent and types of tasks, and it gave reasonable values I could use. They recommended documenting with a simple spreadsheet tracking hours and tasks, which worked fine for my situation. For your specific situation, they analyze your actual documents and circumstances, not just generic advice. They had me upload my prior returns and some basic documentation about our living arrangement, then provided personalized guidance. They didn't require creating a formal agreement after the fact, but did suggest having something in writing that acknowledged the exchange of services for housing, even if it was just a simple signed statement.

How does this service actually work? Do they just connect you to the regular IRS line or do they have some special access? I've been on hold with the IRS for hours multiple times this month and I'm losing my mind.

Sorry, but this sounds too good to be true. The IRS phone lines are notoriously impossible to get through - how would some third-party service magically fix that? Sounds like a waste of money to me.

The service basically waits on hold for you with the IRS and then calls you when an agent picks up. It uses the regular IRS phone lines, but their system handles all the waiting and navigating the phone menus. You just get notified when there's actually a human ready to talk. It's definitely not magic - just technology doing the annoying waiting part for you. I was personally surprised it worked so well, but it did save me several hours of frustration. I was able to get clear documentation from the IRS agent about my specific situation, which gave me peace of mind that I wasn't going to face issues with my filing.

That's a good point about potential extra scrutiny. Would you recommend we create some kind of formal written agreement now, even though we've been operating on a verbal understanding for months? And what kind of documentation should he keep for his expenses?

Yes, I'd definitely recommend creating a written agreement now, even though it's retroactive. Just keep it simple - outline that in exchange for living space, he provides X hours of childcare per month and handles specific maintenance tasks. Date it and have both parties sign it. For expenses, he should keep receipts for anything related to maintaining his living space and caring for his children. Grocery receipts, clothing purchases, school supplies, medical expenses - anything that shows he's financially responsible for his dependents. Digital records work fine too - photos of receipts or bank/credit card statements with relevant expenses highlighted.

I work in tax prep (not a CPA) and we see this situation more often than you'd think. The key is whether the basement has separate facilities. Does it have its own bathroom, kitchen area, separate entrance? If it functions as a separate living unit, the IRS typically accepts it as a separate household even if it's technically part of the same building.

This is really helpful, thank you! I'm curious about the documentation aspect - when you documented the fair market value of childcare services, did you just research local rates and create your own estimate, or did you get some kind of official valuation? I want to make sure we're doing this correctly from the start rather than scrambling if the IRS has questions later. Also, did you end up creating any kind of formal agreement with your nephew about the arrangement, or was it sufficient to just have good records of the services provided and expenses paid?

For the documentation, I just researched local childcare rates through Care.com and local daycare centers, then created a simple spreadsheet showing the hours and applying the average rate. Nothing fancy or official needed - just reasonable market research that you could defend if questioned. We did create a simple one-page agreement that outlined the arrangement: housing in exchange for childcare services and property maintenance. It wasn't legally complex - just stated the basics like "Nephew provides approximately X hours of childcare per week and handles lawn care/minor repairs in exchange for use of guest house." Having it in writing, even informally, really helped when I spoke with my tax preparer. The IRS generally accepts reasonable documentation as long as you can show you made a good faith effort to value the services fairly. Your situation sounds very similar - the key is just being able to demonstrate that your ex-SIL is contributing real value that substitutes for rent payments.

Thank you for sharing your experience with the garage apartment situation! It's really reassuring to hear about similar cases working out well. I'm curious - when you mentioned that the IRS has ruled favorably in several cases with shared addresses, do you happen to remember where you found those rulings or cases? I'd love to read through them for additional peace of mind. Also, for the documentation of childcare hours, did you create some kind of log or tracking system? I'm trying to figure out the best way to document the 15-20 hours per week my ex-SIL spends watching our kids when we work late. A simple spreadsheet seems like it would work, but I want to make sure I'm capturing everything the IRS might want to see. Your point about separate economic units really clicks for me - that seems to be the core issue rather than the physical living arrangement. Thanks for the Publication 501 reference too!