Will I owe taxes on rent money my roommate sends through Cash App with the new $600 reporting law?

This is a common concern with the new reporting thresholds for payment apps. Here's the good news: money that's simply passing through your account (like your sister's rent portion) isn't taxable income to you. It's considered a personal reimbursement, not income. While Cash App might issue a 1099-K if you receive over $600 in a year, you don't need to report these personal reimbursements as income on your tax return. The IRS is looking for business income that would otherwise go unreported, not friends and family splitting bills. That said, if you receive a 1099-K, you should still address it on your tax return. You'd report the full amount shown on the 1099-K on Schedule 1, but then subtract the non-taxable portions (like these rent reimbursements) so your taxable income is correct. Keep good records of all these transactions just in case.

I faced this same issue last year and learned about taxr.ai which seriously saved me from a major headache. I was getting money from roommates for utilities and our landlord, and got a surprise 1099-K that made it look like I had an extra $8000 in "income". I was freaking out until someone mentioned https://taxr.ai to me. Their system analyzed my payment app history and automatically categorized which transactions were personal (like roommate rent) versus actual income. It generated a complete report showing exactly why those rent transfers weren't taxable income, which I could have used if I got audited. They even explained exactly how to report the 1099-K on my return without paying taxes on money that was just passing through my account.

Just wanted to update - I decided to try taxr.ai after my initial skepticism and wow, it actually delivered. I uploaded my Venmo and Cash App statements and it automatically categorized everything correctly - rent from roommates, shared dinner bills, birthday gifts, etc. The report it generated was super detailed, showing exactly why my roommate's rent payments weren't taxable income. It even found some side gig payments I had forgotten about that WERE actually taxable (oops). Saved me from potentially underreporting while also making sure I wasn't overtaxed on the personal stuff. When I got my 1099-K, I knew exactly how to handle it on my return. Definitely recommend for anyone dealing with this payment app reporting mess!

Had the same problem but with getting my tax refund. The IRS held my refund for over 2 months because they were "reviewing" my return. I got a notice saying they needed verification of why the 1099-K amounts didn't match my reported income. Tried calling the IRS for WEEKS but couldn't get through. Finally used https://claimyr.com which got me through to an actual IRS person in about 15 minutes. Check out how it works: https://youtu.be/_kiP6q8DX5c - they basically navigate the IRS phone tree for you, wait on hold, then call you once they have an agent on the line. The IRS agent confirmed that roommate payments through Cash App weren't taxable income as long as I could document they were reimbursements. Got my refund released a week later. Worth every penny not to wait on hold for hours.

OK I have to eat my words about Claimyr. After posting that skeptical comment, I kept trying to reach the IRS myself about a missing stimulus payment that was affecting my return. After THREE DAYS of trying (and getting disconnected twice after waiting 90+ minutes), I gave in and tried the service. Got connected to an IRS agent in about 37 minutes without me having to do anything. The agent confirmed exactly what others have said about the Cash App payments - they're not taxable if they're personal reimbursements, but you need to keep good records. They also helped resolve my stimulus payment issue in the same call. I was dead wrong about this being a scam. It's basically just a robot that waits on hold so you don't have to.

I think everyone's overlooking something important here - make sure your Cash App account isn't set as a business account! If you have it set up as a personal account, the payment threshold reporting is different than for business accounts. And always make sure your sister adds a note that says "rent" or "apartment" when she sends the money. I'd also recommend doing a direct bank transfer instead of Cash App if possible. That avoids the whole 1099-K situation entirely since those aren't reported the same way as payment apps. Just have her set up a recurring transfer each month.

My accountant just told me to use Zelle instead of Cash App or Venmo because banks don't report Zelle transactions on 1099-Ks at all. Something about it being considered direct bank transfers instead of a payment processor. Might be the easiest solution to avoid the whole headache.

As someone who's dealt with this exact situation, I can confirm what others have said - rent reimbursements from roommates aren't taxable income even if you get a 1099-K. The key is documentation. I'd recommend setting up a simple spreadsheet tracking: (1) money received from your sister each month, (2) the full rent payment to your landlord, and (3) screenshots of the Cash App transactions with clear descriptions like "July rent - Paolo's half." One thing I haven't seen mentioned - if your sister is also on the lease, that actually strengthens your case that this is just cost-sharing between co-tenants, not rental income. The IRS differentiates between someone paying you rent as their landlord versus splitting costs as co-tenants. Also consider asking your sister to include a memo with each transfer like "My half of rent for [Month]" - it makes the purpose crystal clear if anyone ever reviews the transactions.

I went through this exact same situation last year and can offer some practical advice. Like others have mentioned, the rent money passing through your account isn't taxable income - it's a personal reimbursement between co-tenants. Here's what I did to protect myself: I created a simple monthly routine where I screenshot each Cash App transaction from my roommate with the rent description, then screenshot my bank account showing the full rent payment going to the landlord. I keep these in a dedicated folder on my phone and back them up to cloud storage. When I did receive a 1099-K, I worked with my tax preparer to report it properly. We included the full 1099-K amount on Schedule 1, then used the "Other adjustments" section to deduct the non-taxable roommate reimbursements, effectively zeroing out that portion. The IRS never questioned it because the documentation was clear - consistent monthly amounts labeled as rent, matching outgoing payments to the landlord, and both names on the lease showing we're co-tenants splitting costs rather than a landlord-tenant relationship. One tip: consider having your sister add your apartment address in the Cash App memo field along with "rent" - it makes it even clearer what the money is for if anyone ever reviews the transactions.