Friend lived with me (and paid rent) - Do I need to report this as income?

This is actually a common situation! Whether you need to report this income depends on your intent when allowing your friend to stay with you. Since you were primarily helping a friend rather than trying to make a profit, this would generally be considered a "shared living expense" arrangement rather than a rental business. The key factors: 1) The payment was significantly below market rate, 2) It was temporary, and 3) It was less than half your mortgage. When someone contributes to household expenses in a shared living arrangement without a formal lease, the IRS typically doesn't view this as rental income but as cost-sharing. However, if you claimed any home-related deductions, things get more complicated. You can't deduct expenses for parts of your home that were used personally by your friend (like utilities for his room).

I went through something similar last year with my brother staying in my spare room. I was totally confused about how to handle it on my taxes. I found this service called taxr.ai (https://taxr.ai) that was super helpful. I uploaded my situation details and some screenshots of our payment history, and they analyzed everything and told me exactly how to handle it. Saved me from potentially reporting income I didn't need to report! They even explained the difference between rental income vs cost sharing arrangements with documentation to back it up. Might be worth checking out if you want peace of mind.

Just wanted to follow up - I ended up trying taxr.ai and I'm really glad I did! I uploaded screenshots of the Venmo payments from my friend and explained our situation. They determined it was definitely shared living expenses not rental income. They provided a detailed explanation document with references to specific tax code sections that I'm keeping with my tax records. Super easy process and gave me peace of mind that I'm filing correctly. Definitely worth it when you're in a gray area situation like this!

Had a similar issue last year and spent HOURS trying to get through to the IRS to get a clear answer. Finally found Claimyr (https://claimyr.com) and they got me connected to an actual IRS agent in about 20 minutes instead of the usual 2+ hour wait. You can see how it works here: https://youtu.be/_kiP6q8DX5c. The agent confirmed that temporary cost-sharing arrangements like yours typically don't count as rental income. Just make sure you're not claiming any expenses related to the room your friend used. Having that direct confirmation from the IRS gave me total confidence when filing.

Ok I need to apologize to everyone. I was so cynical about Claimyr but I was desperate to get an answer before filing my taxes (had a similar roommate situation but for a full year). I tried it yesterday and it actually worked! Got connected to an IRS agent in about 15 minutes. The agent confirmed that my situation was cost-sharing not rental income since: 1) payments were below market rate, 2) no formal lease, and 3) no profit motive. Having that direct answer from the IRS gave me confidence to file without reporting the income. Sorry for being so negative before - just shocked something actually worked as advertised when dealing with taxes!

Something everyone's forgetting - if the room was EXCLUSIVELY used by your friend (like they had their own private bedroom/bathroom), and you were charging a regular amount each month, the IRS might consider this rental income regardless of your intention or relationship. I got audited for a similar situation with my cousin staying with me. The IRS looked at factors like: Did you provide services (cleaning, etc.)? Was there a specific amount paid regularly? Did they have exclusive use of the space? For me, they ultimately decided it WAS rental income and I had to amend my return.

WAIT actually i think no one has mentioned the 14-day rule!! If you rent your property for LESS than 15 days in a year you don't have to report ANY of the income!! Look it up - "Master's exception" since it started with people renting their homes for the Master's golf tournament.

I'm dealing with a very similar situation right now! My sister stayed with me for 8 months last year and paid me $500/month for her room. Reading through all these responses, I'm getting mixed signals about whether this needs to be reported. From what I understand, the key factors seem to be: 1) relationship/intent (helping family vs. profit motive), 2) below market rate payments, 3) temporary arrangement, and 4) whether it was exclusive use of space. My situation checks most of these boxes like yours does. I'm leaning toward treating it as cost-sharing rather than rental income, but Leo's audit experience has me worried. The fact that both our situations involved exclusive use of a bedroom/bathroom with regular monthly payments does seem to potentially push it into rental territory according to IRS guidelines. Has anyone else here actually been through an audit for this type of situation? I'd love to hear more real experiences rather than just theoretical advice.

I actually went through an audit for this exact situation about 3 years ago. My brother stayed with me for 6 months and paid $700/month for exclusive use of a bedroom and bathroom. Initially I didn't report it as rental income because I thought it was just family helping family. The IRS auditor looked at several factors: the exclusive use of space, regular monthly payments, and the fact that we had a clear verbal agreement about the amount. They ultimately determined it was rental income that should have been reported. However, the auditor also explained that I could deduct proportional expenses (utilities, property taxes, mortgage interest, repairs) based on the square footage of the rented area. When I calculated everything, the deductions actually offset most of the additional tax liability. The penalties and interest were the real cost - about $400 total. The auditor told me that family relationships don't automatically exempt you from rental income rules if the arrangement looks like a landlord-tenant relationship in practice. For both you and OP, I'd honestly recommend getting professional advice given the exclusive use and regular payment factors. The cost of a tax professional consultation is way less than dealing with an audit later.

Reading through all these responses, I'm seeing a lot of conflicting advice and it's making me more confused than when I started! Some people are saying it's definitely cost-sharing, others are saying it could be rental income, and then there are these audit stories that are frankly terrifying. What strikes me is that the people who actually went through audits (Leo and Kingston) both ended up having to treat similar arrangements as rental income. The common factors seem to be exclusive use of space and regular monthly payments - which describes my situation exactly. At this point, I'm thinking it might be safer to just report the $3,250 as rental income and claim the proportional deductions that Kingston mentioned. Even if I pay a bit more in taxes, it's probably better than risking penalties and interest if I get audited later. Has anyone here actually calculated what those deductions might look like? I'm trying to figure out if the bedroom/bathroom he used was maybe 15% of my total house square footage - so could I deduct 15% of my mortgage interest, property taxes, utilities, etc.? I really appreciate everyone sharing their experiences, especially those who went through audits. It's given me a much clearer picture of how the IRS actually handles these situations in practice vs. theory.

Based on all the discussion here, I think the safest approach is definitely to report this as rental income and claim the proportional deductions. The audit experiences from Leo and Kingston really highlight that the IRS looks at the practical aspects - exclusive use of space, regular payments, and clear agreements - rather than just the relationship or intent. I've been in a similar situation with my cousin, and after reading through these responses, I calculated that my deductions (15% of mortgage interest, property taxes, utilities, and repairs based on square footage) actually offset about 70% of the additional tax on the rental income. The net increase to my tax bill was much smaller than I expected. For anyone else in this situation, I'd recommend: 1) Calculate the square footage percentage of the space used exclusively by your friend/family member, 2) Keep detailed records of all payments received, 3) Document your deductible expenses (mortgage interest, property taxes, utilities, insurance, repairs), and 4) Consider it rental income to avoid potential audit issues later. The peace of mind knowing you're compliant with IRS rules is worth the small additional tax cost, especially when the deductions help offset most of it anyway.

I've been following this thread closely as someone who went through a very similar situation last year. After reading all the experiences shared here, especially the audit stories from Leo and Kingston, I decided to take the conservative approach and report my roommate's payments as rental income. My situation was almost identical to yours - friend staying in my spare bedroom with private bathroom for 7 months, paying $600/month. I was initially going to treat it as cost-sharing, but the exclusive use factor and regular monthly payments made me nervous after seeing how the IRS actually handles these cases. I ended up calculating that the bedroom/bathroom was about 18% of my total home square footage, so I claimed 18% of my mortgage interest, property taxes, utilities, insurance, and some repair costs as rental deductions. The deductions offset about 65% of the additional tax on the $4,200 rental income, so my actual tax increase was only around $280. For the peace of mind and audit protection, it was absolutely worth it. I kept detailed records of all the Venmo payments and took photos of the space to document the exclusive use arrangement. If you're on the fence, I'd really recommend going the rental income route - the deductions make it much less painful than you'd expect!

Thanks everyone for sharing your experiences! This thread has been incredibly helpful. After reading through all the audit stories and real-world examples, I've decided to take the conservative approach and report the $3,250 as rental income. The bedroom and bathroom my friend used exclusively was about 220 sq ft out of my 1,400 sq ft house, so roughly 16%. I'm going to claim 16% of my mortgage interest, property taxes, utilities, and insurance as rental deductions. Based on the calculations others have shared, this should offset a significant portion of the additional tax liability. Better to be safe and compliant than deal with potential audit issues down the road. The exclusive use of space and regular monthly payments seem to be the key factors the IRS focuses on, regardless of our intent to just help a friend. Thanks again for all the insights - this community is amazing!

I'm new to this community but have been dealing with a very similar situation! My college friend stayed with me for 4 months last year and paid $700/month for my spare bedroom and bathroom. I was initially planning to treat it as cost-sharing since we're friends and it was temporary, but after reading through this entire thread, I'm completely changing my approach. The audit experiences from Leo and Kingston are really eye-opening - it seems like the IRS focuses on the practical aspects (exclusive use, regular payments, clear agreement) rather than the relationship or intent. The fact that both of them had to treat similar arrangements as rental income despite the family relationships really drives home that point. I'm going to follow Andre's lead and report the $2,800 as rental income, then claim proportional deductions based on square footage. My guest room/bathroom is about 180 sq ft out of 1,200 total, so roughly 15%. Based on everyone's calculations here, the deductions should offset most of the additional tax liability anyway. Thanks to everyone who shared their real experiences - this thread has been incredibly valuable for those of us navigating these gray areas. Better to be conservative and compliant than risk penalties and interest later!

I've been following this thread and wanted to share my perspective as someone who works in tax preparation. The discussion here has been really comprehensive, and I appreciate everyone sharing their real audit experiences - that's invaluable information. After reading through all the responses, I think the community has reached the right conclusion: when you have exclusive use of space and regular monthly payments, it's safest to treat this as rental income regardless of the relationship or intent. The IRS guidance is pretty clear that they look at the substance of the arrangement, not just the form. For anyone still on the fence, here's what I typically advise clients in similar situations: Calculate the square footage of the exclusively used space, report the income, and claim proportional deductions for mortgage interest, property taxes, utilities, insurance, and qualifying repairs. Keep detailed documentation of payments received and take photos of the space for your records. The math shared by community members here is spot-on - those deductions usually offset 60-75% of the additional tax liability, making the net impact much smaller than people expect. Plus you get the peace of mind knowing you're fully compliant if you ever face an audit. Thanks to everyone who shared their experiences - this is exactly the kind of real-world guidance that helps people navigate these tricky tax situations!