SSI & Parents Paying Taxes on Rent/Room& Board Portion
We have been asked this question many times. With help from the IRS and MDOD here is our answer:
Many of the beneficiaries we serve live with their parents, and some pay their parents for room and board. Paying one’s “fair share” of household expenses for food and shelter can help him or her qualify for up to the full SSI federal benefit rate (by ensuring the person does not receive “in kind support and maintenance”), but is the income taxable to the parents?
In general, such income would be taxable. It is important that any parent in this situation contact the IRS directly (1-800-829-1040) to get details, as each person’s circumstances may differ.
However, one can refer to IRS Publication 527, “Residential Rental Property” (http://www.irs.gov/pub/irs-pdf/p527.pdf). This publication provides some relevant information, including Chapter 3, “Reporting Rental Income, Expenses, and Losses”, and two sections on page 17, “Renting Part of Property” and “Not Rented for Profit”.
Generally, the income is reported on Schedule E, and expenses the parent pays for the son’s or daughter’s room and board costs (such as the son’s or daughter’s share of household food, utility and home maintenance expenses) can be deducted from the income, similarly to business expenses being deducted from business income. In short, only the “profit” (the amount by which the room and board payments exceed the expenses) would be taxable.
Of course, we are not tax professionals, and should refer parents with tax questions to the IRS or an accountant for information specific to their circumstances.