Roomates rent, On/Off the radar

[amarowsky]

Anyone here rent rooms of their home to friends/family/strangers/other? If so, which methods do you use, on or off the radar (claimed as income for taxes or under the table)?

I ask because I have a few roomies, and am planning on buying a new home within 4-6 years. I'm not sure if I'm going to sell my house or rent it out @ that time. I'm curious that if by putting them as taxable renters if the tax burden would be too much. The only reason I would want to, is so that when I look for my next home my debt to income ratio would be better. Also I have heard that to prove rent as income, they have to be renting and paying for >2 years.

Anyone know if this is true, or something I should consider worrying about sooner than later?

[riverwed070707]

Do they have a contract? If there is no legal agreement for them being there, you likely can't claim it as income (at least not in a housing application). We rented a house and the tax liability was quite large; however, we also got to claim depreciation on the house, etc which offset most of the liability. i'm not sure how that works when you also live in the home. Perhaps is like a business deduction where you can claim a percentage of the house as rental? I'd consult a tax professional before deciding.

[cypher1]

One of my good friends is my roommate which I charge $400 cash per month. No actual contract but he does month to month (2.5 yrs so far). No, I do not claim it on my taxes. Now if I decided to re-locate for work, I'd most likely just rent out my whole house instead of selling.

[amarowsky]

I would most likely rent the house out as a whole after I move. The only possible problem though would be the transition timeframe. When I want to move I'd like to have it show even partially rented at least two years before. I heard (not positive) that the rental income has to have been going at least two years with no major break in vacancy to count as income.