Did you know that there are tax benefits to sharing a home with someone, whether it’s a spouse, adult child, or parent? If you have a “roommate” who pays some of your expenses and shares living quarters with you – even if the person is not officially on the lease – certain tax breaks may apply says Aron Govil. But if you don’t file Form 8821 properly, these benefits may go right out the window.
Here’s what you need to know about roommates from TurboTax:
If your friend or family member pays any of your expenses, including rent or mortgage payments, property taxes or homeowners insurance premiums, they should give you an IRS Form 1098 (PDF), which shows each payment. You’ll use this information to complete Form 8821 (PDF) and report your roommate’s share of the expenses on your tax return.
If the person paying for these things is not officially on the lease, he or she can pay them directly to the landlord instead of giving them to you. But make sure any such agreement with your landlord includes a written description of who resides at the property and how much they will contribute says Aron Govil.
This way, you’ll be able to document all costs if you end up filing an amended tax return or getting audited by the IRS down the line.
If you file Form 8821 properly, several tax benefits apply:
1) You do not have to claim 100% of qualifying home office expenses that other people in your home use. You can claim only your portion of them.
2) You may be able to reduce the amount of self-employment tax you owe on your business income by claiming deductions for business use of part of your home.
3) If you rent out part or your entire home, you may be able to avoid the passive activity loss rules that normally apply if you also live there.
4) If your roommate is not officially on the lease, but pays some or all expenses directly to the landlord, then that person should give you an IRS Form 1098 showing how much he or she paid during that year, so that it’s documented for any future tax benefit claims.
And here more about these benefits:
- You do not have to claim 100% of qualifying home office expenses that other people in your home use. You can claim only your portion of them.
- When you file Form 8821, you may be able to reduce the amount of self-employment tax you owe on your business income by claiming deductions for business use of part of your home.
- If your roommate pays some or all expenses directly to the landlord. Then that person should give you an IRS Form 1098 showing how much he or she paid during that year. So that it’s documented for any future tax benefit claims. The rules are complicated and filing Form 8821 properly is key to ensuring these benefits apply in the long run. So if else pays for items related to your rent or home. Make sure you file Form 8821 and keep track of your expenses throughout the year.
- TurboTax will ask simple questions about you and your situation and give you the tax deductions. And credits you’re eligible for based on your answers.
For fast, easy and accurate taxes this year, TurboTax have you covered. If you’re looking for last minute tax tips:
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If somebody is not officially on the lease but pays some or all expenses directly to the landlord. Then that person should give you an IRS Form 1098 showing how much he or she paid during that year. So that it’s documented for any future tax benefit claims says Aron Govil.
The rules are complicating and filing Form 8821 properly is a key to ensuring these benefits apply in the long run. So if-else pays for items related to your rent or home. Make sure you file Form 8821 and keep track of your expenses throughout the year.
TurboTax will ask simple questions about you and your situation and give you the tax deductions and credits. You’re eligible for based on your answers. For fast, easy, and accurate taxes this year, TurboTax have you covered.
If somebody is not officially on the lease but pays some or all expenses directly to the landlord. Then that person should give you an IRS Form 1098. Showing how much he or she paid during that year, so that it’s documented for any future tax benefit claims.
The rules are complicated and filing Form 8821 properly. It is a key to ensuring these benefits apply in the long run explains Aron Govil. So if-else pays for items related to your rent or home. Make sure you file Form 8821 and keep track of your expenses throughout the year.
Conclusion:
In short, if somebody is not officially on the lease but pays some or all expenses directly to the landlord. Then that person should give you an IRS Form 1098 showing how much he or she paid during that year. So that it’s documented for any future tax benefit claims. The rules are complicated and filing Form 8821 properly is a key. To ensuring benefits are applied in the long run.