Do I need to pay taxes on money from a friend temporarily renting a room in my house?

This is actually a common question! Yes, technically any money you receive as payment for someone staying in your property is considered rental income and should be reported on your taxes. The IRS doesn't make exceptions just because it's a friend or family member. The good news is you can also deduct expenses related to the rental. Since your friend is using just one room, you'll need to calculate what percentage of your home that room represents (based on square footage). Then you can deduct that percentage of expenses like utilities, insurance, repairs, and even mortgage interest. You don't need to provide him with any special tax form since this isn't a business relationship. But you should keep records of the payments and any expenses you plan to deduct. Keep in mind that if you rent for fewer than 15 days during the tax year, you don't need to report the income at all (the so-called "Augusta Rule"). But since you mentioned 6-7 months, you're well beyond that threshold.

I was in almost this exact situation last year, and I was super confused about how to handle it on my taxes. I ended up using taxr.ai (https://taxr.ai) to analyze my situation. You just upload documents or explain your situation, and they break down the tax implications. In my case, they pointed out that I needed to file Schedule E for the rental income BUT I could also claim a portion of my home expenses as deductions - stuff I wouldn't have known to do. They even calculated exactly what percentage I could claim based on the square footage. Saved me from both underpaying taxes (which could've led to penalties) AND from overpaying by missing deductions.

Just wanted to update after trying taxr.ai for my room rental situation. Super helpful! I was able to figure out that since I was renting through a vacation site, I needed to report on Schedule C instead of Schedule E, and they walked me through which expenses were legitimate deductions. The best part was they showed me how to properly document everything in case of an audit. I had no idea I could partially deduct my internet bill based on guest usage! They even explained how to handle the cleaning fees I was charging. Definitely made tax season less stressful.

Something else to consider - I was in a similar situation and spent WEEKS trying to get answers from the IRS about how to properly report this kind of occasional rental income. Called the IRS number like 20 times and either got disconnected or was on hold for hours. Finally used Claimyr (https://claimyr.com) to get through to an actual IRS agent. They have this system that basically holds your place in line with the IRS and calls you when an agent is ready to talk. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed I needed to report the income but also told me about deductions I could take that I had no idea about. Saved me a ton of money and stress.

Ok I need to eat my words here. After wasting an entire afternoon trying to get through to someone at the IRS about this exact rental room situation, I broke down and tried Claimyr. I was connected to an IRS agent in like 25 minutes while I was cooking dinner. The agent walked me through exactly how to report income from a friend staying in my spare room and what percentage of expenses I could legally deduct. Turns out I've been doing it wrong for years! They even helped me figure out if I should amend previous returns (turns out I don't need to in my case). The peace of mind was totally worth it, and I saved literally hours of frustration. Never thought I'd be recommending something like this, but it actually works.

Just fyi - friend or not, writing "rent" in the memo line basically confirms this is rental income in the eyes of the IRS. If you were just splitting household expenses it would be different, but when they specifically label it as rent, that's pretty definitive. Don't forget to look into your state's laws too. Some states have different thresholds for when you need to register as a landlord, even for informal arrangements. In my state, anything over 6 months technically requires registration, though they rarely enforce it for single-room situations.

I'm confused why everyone's making this complicated? If ur friend is just helping with bills its not income its cost sharing. My roommate gives me money every month for mortgage and utilities and i never report that as income cuz its not - we're just splitting living expenses. Only becomes rental income if ur making profit above your actual costs.

I went through something very similar last year with a friend who needed temporary housing. What really helped me was keeping detailed records from the start - even though it wasn't planned as a formal rental arrangement. One thing I learned is that the IRS looks at the substance of the arrangement, not just what you call it. Since your friend is paying you for the right to occupy space in your home (and has been there 7 months), it's likely considered rental income even if it started as just helping a friend. Here's what I did: I calculated the percentage of my home the room represented (about 15% in my case), then tracked that percentage of my utilities, insurance, and other housing expenses as deductions. For the months your friend was there, you can deduct the proportional share of these expenses against the rental income. The $4,500 you received should be reported as rental income on Schedule E, but don't forget you can offset it with legitimate expenses. Given that comparable rooms rent for $900-1000 and you're only charging $650, you're probably not making much profit after deductions anyway. I'd recommend starting to keep better records going forward and maybe drafting a simple written agreement to clarify the arrangement, especially if this continues longer than expected.

I was in almost exactly this situation a couple years ago! Friend needed a place to crash "temporarily" and ended up staying 8 months. The memo line saying "rent" is definitely going to be treated as rental income by the IRS - I learned this the hard way. Here's what I wish I had known from the start: even though you're charging below market rate and it wasn't planned as a business, the IRS considers this rental income. But the silver lining is that you can deduct a proportional share of your housing expenses (utilities, insurance, repairs, etc.) based on the square footage of the room. Since you've collected $4,500 over 7 months, you'll need to report this on Schedule E. Calculate what percentage of your home that room represents - if it's 10% of your total square footage, you can potentially deduct 10% of qualifying expenses for those months. Keep all your utility bills, insurance statements, and any maintenance receipts from this period. Even though it started informally, having good records will help if you ever get audited. And honestly, after deductions, you might find that your actual taxable rental income is pretty minimal given that you're charging well below market rate. The important thing is to report it correctly rather than risk issues with the IRS later. Better to be transparent about the income and take advantage of the legitimate deductions you're entitled to.

I've been through a very similar situation and want to emphasize something important that I learned: the IRS doesn't really care about your original intentions or whether this was supposed to be temporary. What matters is the actual arrangement - someone paying you money to occupy space in your home for an extended period. Since your friend has been writing "rent" in the memo line and you've been accepting regular payments for 7 months, this is pretty clearly rental income in the eyes of the IRS. The good news is that you're not necessarily going to owe a ton in taxes because you can deduct expenses. Here's what I'd suggest doing right now: start documenting everything retroactively. Go back through your bank statements and utility bills to establish a clear record. Calculate the square footage of the room (and bathroom if exclusively used) as a percentage of your total home. Then you can deduct that percentage of utilities, insurance, maintenance, and other housing costs for the months your friend has been there. One thing that really helped me was creating a simple spreadsheet tracking the monthly "rent" payments alongside the monthly expenses I could deduct. Even charging $650 instead of market rate of $900-1000, you might find that after legitimate deductions, your actual taxable rental income is quite manageable. Don't put this off - it's much easier to get organized now than to scramble during tax season. And honestly, being transparent with the IRS about rental income (while taking proper deductions) is way better than trying to avoid reporting it and potentially facing issues later.

I'm dealing with this exact situation right now! My college roommate has been staying in my spare room for about 5 months after a job loss, and like you, it was supposed to be temporary but keeps extending. He's been Venmo-ing me $500/month with notes like "rent money" and "thanks for the room." I've been stressing about the tax implications too, especially since I never intended this to be a rental situation. Reading through all these responses has been really helpful - sounds like I definitely need to report it as rental income on Schedule E, but the expense deductions should help offset a lot of it. One question I have for the group: if my friend moves out before the end of the tax year, do I only report the rental income and take deductions for the months he was actually staying here? Or does the IRS expect some kind of annual calculation? I'm hoping he'll find his own place by summer, but want to make sure I handle the taxes correctly regardless of when that happens. Also, has anyone had experience with how this affects things like homestead exemptions or other primary residence benefits? I'm worried that reporting rental income might complicate my status as a homeowner for other tax purposes. Thanks for all the detailed advice in this thread - definitely feeling less panicked about the whole situation now that I understand I can deduct proportional expenses!

I went through this exact situation a few years ago with a friend who needed temporary housing after a breakup. The "temporary" arrangement ended up lasting 9 months, and like you, I had no idea about the tax implications until I started researching. Here's what I learned: once your friend started writing "rent" on those check memos and you've been accepting regular payments for 7 months, the IRS will definitely consider this rental income that needs to be reported on Schedule E. The fact that it wasn't originally planned as a business arrangement doesn't matter - it's the actual pattern of payments that counts. But don't panic about owing huge taxes! Since you're charging $650 when market rate is $900-1000, you're likely not making much profit once you factor in deductions. Calculate what percentage of your home that room represents (measure the square footage of the room, plus bathroom if he has exclusive use). Then you can deduct that same percentage of your housing expenses - utilities, insurance, maintenance, mortgage interest, etc. - for the months he's been there. In my case, the room was about 14% of my house, so I could deduct 14% of all qualifying expenses. After deductions, my actual taxable rental income was only about 30% of what I collected in "rent" payments. Start keeping better records now and consider drafting a simple agreement about expectations and timeline. This will help both for taxes and for managing the friendship if the "temporary" situation continues stretching out!

I went through something very similar with a family member who stayed in my guest room for about 6 months. Like you, it started as just helping someone out, but those regular payments with "rent" written on them definitely caught the IRS's attention when I tried to figure out my taxes. Here's what I found out after consulting with a tax professional: yes, you absolutely need to report this as rental income on Schedule E, even though it wasn't your original intention. The IRS looks at the substance of the arrangement - regular payments for occupying space in your home over an extended period equals rental income, regardless of the personal relationship or initial intentions. The silver lining is that you can deduct a proportional share of your home expenses. Calculate the square footage of the room (and exclusive-use bathroom if applicable) as a percentage of your total home. For the months your friend was there, you can deduct that percentage of utilities, insurance, maintenance, mortgage interest, and even depreciation on your home. In my case, the guest room was about 10% of my house, so I deducted 10% of qualifying expenses for those 6 months. After legitimate deductions, my actual taxable rental income was only about $800 out of the $3,600 I had collected in payments. Start organizing your records now - bank statements showing the deposits, utility bills, insurance payments, any maintenance receipts. The IRS appreciates good documentation, and it'll make filing much smoother. Also consider having a conversation with your friend about expectations going forward, since "temporary" arrangements have a way of becoming longer-term situations. Don't stress too much about it - this is actually a pretty common scenario, and as long as you report it honestly and take proper deductions, the tax impact probably won't be as bad as you're imagining!