How Can I Add Money To My Laundry Card Without Going To The Rental Office

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We are considering renting a room to one of our siblings temporarily. She's moving out here for a new job, and since we live in an pricey area living with u.s. volition offer her a manner to save upwards some money. On our side, nosotros are two people with 4 bedrooms, so nosotros accept plenty of room right now.

Of course, horror stories abound when renting to family members. I don't know what to say well-nigh that. I don't foresee it beingness a problem equally we are pretty close, and nosotros are all responsible professional adults, but I'yard sure everybody else says that likewise. Being that we recently rented a unit from a another family fellow member successfully, I as well feel good being able to "pay it frontward".

The Programme
We would collect "hire". The idea is that she would pay ane/third of all utilities (gas, electric, h2o, garbage, cable, internet) plus some buffer for other miscellaneous household maintenance items. This obviously will be much less that what it would cost to share an flat on the open marketplace, let solitary a studio. Then she'south paying her way, merely we aren't making much turn a profit if any, ideally preventing any guilt or resentment on either side.

The Problem: Fair Rental Price
Only so I did some enquiry about the potential tax implications. Is rent always taxable income, even if from a relative sharing a home? From what I can tell, the IRS says yes. (Someone delight right me if I'm wrong.)

However, if I am reading the IRS "Renting to Relatives" regulations right, the practiced news is that if I rent out the room at "fair rental price", I can start deducting a portion of my expenses – including interest, taxes, repairs, maintenance, utilities, insurance, and depreciation. This has the potential to offset the rental income completely (resulting in no cyberspace tax owed), although I can't create a loss since information technology's my personal dwelling house.

The bad news is that if I don't charge fair market rent, and so I tin can't deduct anything. 100% of the rental income is now fully taxable every bit passive income. Having to pay taxes on money that is basically covering the utilities just doesn't audio right.

Solution?
From anecdotal show, I'm certain compliance is spotty at best in this area. What if a son pays $200/calendar month to live with Mom and Dad? But to fall in line with the rules, it seems like I should either (i) accuse something close to "market" rent and possibly buy her a nice gift later or (2) not accuse anything at all. My idea was only have her pay some of the utilities directly. This way I don't actually accept any money. Any suggestions?

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