Girlfriend paying rent

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crinkles2
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Re: Girlfriend paying rent

Post by crinkles2 »

I'd sell the place, move to a rental and split the rent. Then invest the proceeds from your property sale.
rob65
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Re: Girlfriend paying rent

Post by rob65 »

They rent so it’s a little different, but my son and his girlfriend handle this by dividing up the bills. He pays the rent; she pays the utilities and buys most of the groceries. I’d approach it that way.
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Cubicle
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Re: Girlfriend paying rent

Post by Cubicle »

Lots of good replies. Especially the buy out & I'll rent to you instead.

I am a home owner. I am single. If/when I ever fall into the "let's live together" situation, I don't know what I'll do with my place. Like a prior poster said, I'll probably want us both to start fresh with a new-to-us property. Until we are married, I don't want ownership of my home in question.

I think the $750 is a good number as a girlfriend. It's doesn't sound like market, but OP your situation is different. And definitely not "rent"... utilities, yard maintenance, groceries, etc...
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ohboy!
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Re: Girlfriend paying rent

Post by ohboy! »

Interesting replies. Some nice feedback and some silly assumptions.

Yes to get the CA renters credit she would have to make

$42,932 or less if your filing status is single or married/registered domestic partner (RDP) filing separately

She’s making $120k.

Rent for my house would be $2200-$2750 a month probably. Rooms tend to be the best deals in SD as I said a room in my place is probably $750ish. Renting a whole place is the second best. Owning is arguably the worst. Though my place is up in estimated value 12% in 2 years it would cost quite a bit of that to sell it.

More on house costs. As people seemed interested in those numbers. $125 a month avg electric. $50 internet. $100 water. $650 taxes. $50 insurance. So far $6k a year in maintenance is my best guess from 2 years owning and big items I see racking up in the next 5 years. The house itself is only worth $200k according to insurance, it’s the dirt that is expensive.

We would love to get into a new place with equal equity but right now she needs to focus on paying down her student loan debt. Nice that she’s getting interest free months for cov19 while being fully employed. And only paying $750 share of prop tax, insurance, util, upkeep (let’s not call it rent).
investing engineer
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Re: Girlfriend paying rent

Post by investing engineer »

neverpanic
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Re: Girlfriend paying rent

Post by neverpanic »

softwaregeek wrote: Sat Jun 06, 2020 5:44 pm
windaar wrote: Sat Jun 06, 2020 5:30 pm I would not want a girlfriend as a tenant in my house. Depending on where you live she could invoke all kinds of rights if you break up, like refusing to leave and having her new boyfriend move in with her. How does that sound?
Only if there is a written lease.
In California, even without a written lease, if she's been living there for some number of months, she's considered a tenant and the landlord would have to give 30 days notice.
I am not a financial professional or guru. I'm a schmuck who got lucky 10 times. Such is the life of the trader.
Seasonal
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Re: Girlfriend paying rent

Post by Seasonal »

There are millions of people living with a partner without marriage (a larger share of US adults have cohabited than have been married, https://www.pewresearch.org/fact-tank/2 ... n-the-u-s/). I'd bet only a tiny fraction have any formal agreements. I never hear any stories about tax or other legal issues relating to paying rent.

Here's an article by a California law firm on cohabitation issues: https://www.stimmel-law.com/en/articles ... -under-law
SR7
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Re: Girlfriend paying rent

Post by SR7 »

stan1 wrote: Sat Jun 06, 2020 4:33 pm
anon_investor wrote: Sat Jun 06, 2020 4:31 pm
Kenkat wrote: Sat Jun 06, 2020 4:27 pm
ohboy! wrote: Sat Jun 06, 2020 3:38 pm I think we are settled on the deal.
This is all that matters. Leave it be.
The lawyer in me wants to know what contingencies are in place if she fails to pay rent on time or they break up...
Well at least California does not recognize common law marriages so there's that.
That’s the question I had, common law marriage.

Where I live, if you share a house and a bed with your GF, then after a certain amount of time she becomes your de facto wife. If she contributed to the household in any way then she could argue part ownership of the asset if you break up.

That’s why some here prefer to formally rent with lease and tax etc, as it keeps ownership clear.

Sounds like not an issue where you live, and to be honest it’s rarely an issue here from what I hear.

OP, I hope you enjoy living together and it all goes well.
I studied Physics not Finance, so best to ignore anything I say about money.
tibbitts
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Re: Girlfriend paying rent

Post by tibbitts »

Boglegirl81 wrote: Sat Jun 06, 2020 7:46 pm
halfnine wrote: Sat Jun 06, 2020 4:40 pm
CAsage wrote: Sat Jun 06, 2020 3:56 pm Since GF is not enjoying any of the appreciation on the house, it makes perfect sense for her to pay 1/2 of the nominal recurring costs of the house - property taxes, insurance, utilities etc. I would truly hesitate to charge her any more than $750 just because she can afford it, because she is not getting any of the capital gain. Long term plan on that might be worth discussing....
This. Your GF is missing out on the opportunity cost of having a home and additionaly the benefit of having it subsidized by a roommate.

When I moved in with my SO they originally wanted to charge me market rates. At which point, fair being fair, I offered to buy the place off them and charge them market rates. They, obviously, weren't so fond of that idea and so we settled on a more reasonable arrangement.
I can see this point, but I’m selling my house to move in with my boyfriend. He makes more than I do, and I’m looking at a covid-related lay-off, so I won’t have to pay any of the house expenses. However, I was way in over my head for the 2 years I have owned my single family home (which is under contract now) and I’d gladly pay him close to market rate in “rent” if I had to just to be a tenant again. I found home ownership to be an expensive hassle, but I guess I’m in the minority because there was no shortage of people wanting to buy my house. My house is closing in a few days and I’m quite looking forward to being a “tenant” again.
It partly depends on luck - you may have hit some times when your house needed more attention than others. What expensive hassles did you encounter? Bogleheads tend to minimize the downsides of home ownership, I think partly because many are d-i-y enthusiasts and actually enjoy that kind of work rather than think of it as a burden.
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mmmodem
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Re: Girlfriend paying rent

Post by mmmodem »

ohboy! wrote: Sat Jun 06, 2020 11:37 pm Rent for my house would be $2200-$2750 a month probably. Rooms tend to be the best deals in SD as I said a room in my place is probably $750ish. Renting a whole place is the second best. Owning is arguably the worst. Though my place is up in estimated value 12% in 2 years it would cost quite a bit of that to sell it.
Make sure she actually gets a room. You're saying $750 is fair rent for a room. So even if she sleeps in your room all the time, that's not what her $750 pays for. She doesn't get to share in your equity but she paid for a room.

What would I do in your situation? I wasn't willing to to let my gf move in without paying rent because after 60 days, she is a tenant whether she pays rent or not and will have all the rights of one. She wasn't keen on living with me without paying official rent either because if things don't turn out well, she's out on the streets. So I fixed the problem. I put a ring on it. Good luck to you two.
Nate7out
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Re: Girlfriend paying rent

Post by Nate7out »

My girlfriend (now wife) split expenses with me in a similar way. I, of course, was living below my means and had a surplus that had nowhere to go but a taxable brokerage account. We may have been better off if she did not pay expenses and instead contributed more to her 403b. I only say may because her choices had high fees - with better choices it would have been certain. Depending on likelihood of marriage, you might want to take a more holistic approach.
stan1
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Re: Girlfriend paying rent

Post by stan1 »

This thread is getting strange, but if I thought BF/GF was going to cause me troubles with the IRS or thought I'd evict and go to court to collect back rent the last thing I would do is want to get married?
stan1
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Re: Girlfriend paying rent

Post by stan1 »

ohboy! wrote: Sat Jun 06, 2020 11:37 pm (let’s not call it rent).
Exactly, now you are golden unless you invite the IRS in to inspect how many beds you have in the house and which closets are being used.
Ependytis
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Re: Girlfriend paying rent

Post by Ependytis »

I think her paying $750 per month in shared costs is reasonable given she’s not paying rent somewhere else. It doesn’t seem right to me that one party would get a windfall from the arrangement either her not paying shared cost (her windfall) or her having to pay half the total housing costs or $2000 (your windfall). Another way to look at it is if it didn’t work out how would you feel about the arrangement? If it was me and she wasn’t paying any shared costs I wouldn’t feel very good about that. If it was her and she was paying half the total housing costs she probably wouldn’t feel very good about that.
JackoC
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Re: Girlfriend paying rent

Post by JackoC »

stan1 wrote: Sun Jun 07, 2020 9:32 am This thread is getting strange, but if I thought BF/GF was going to cause me troubles with the IRS or thought I'd evict and go to court to collect back rent the last thing I would do is want to get married?
Well like lots of such situations there's a tension between romance and practicality. It doesn't IMO mean a romantic relationship is doomed or invalid if one side or both ever gives *any* thought to the legal/financial impact if it later goes bad . Although I admit I never gave that any thought wrt my wife before we got married, or since.

Anyway there is no tax problem here. Unless you went far out of your way to create one, as say by writing up a lease then not reporting the income. As long as no paper trail contradicts your characterization of the payments as shared expenses, that's what it is. There's no tax cheating, you're not hiding anything, it's just not taxable. If later a bitter partner calls the IRS, it won't matter in the end. That's real life AFAIK, though I know some people like to obsess about *extremely* unlikely tax outcomes.

Although, if you invite someone to live in your home and let them do so for a while, they gain a right not to be simply kicked out on your order, in most places. That's a less far fetched problem with cohabitation than tax. Regardless of payments or (ostensible) marital relationship, despite you being 100% owner. That's something to keep in back of mind, or dismiss as a possibility based on the person and situation as you know them, if you wish.
bayview
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Re: Girlfriend paying rent

Post by bayview »

As a mom of daughters (and a son), I would add this to my earlier post:

Think long and hard before giving up your own place. When you move in with an SO, it can be wonderfully warm and fulfilling, and you learn a lot more about this other person, which can be valuable in deciding whether there’s a real future for the relationship.

But when the place belongs to the SO, either owned or their name on a lease, I really think it can shift the relationship dynamics in not-so-great ways. And if things go sour, you’ve got to find a new place and all the financial consequences. To me, there is less of an ick factor if both move to a new place. (Certainly not suggesting that OP should sell his house to do this.) This discomfort is something that might not resonate with a lots of men, but for a lot of us, it’s there.

However, as I also mentioned, this can be a fantastic opportunity to slay the student loan debt. IF that happens (eat ramens with every remaining penny going to debt payoff) and IF the one who moves in helps carry the load and can still stand up for herself/ himself, this can be a great step for the future of both, whether separately or together.
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RudyS
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Re: Girlfriend paying rent

Post by RudyS »

How does a "landlord" make any money at those high multiples? It used to be, 1% of value of house per month in rent, to cover depreciation, return on investment, expenses, etc. I'm getting too old for these economics it seems.
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ohboy!
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Re: Girlfriend paying rent

Post by ohboy! »

RudyS wrote: Sun Jun 07, 2020 4:02 pm How does a "landlord" make any money at those high multiples? It used to be, 1% of value of house per month in rent, to cover depreciation, return on investment, expenses, etc. I'm getting too old for these economics it seems.
I think there is much speculation on appreciation. Cover the costs barely (or not even) and bank on appreciation exceeding loan interest. The other popular method is short term rental (airbnb), though that has lost some luster lately. I’m pretty sure you will find these crappy rent to cost ratios in a lot of major cities in the US. LA, SF, NYC, etc.

A lot of the rentals were purchased at lower costs. My $600k house was $300k 10 years ago. Now those owners who got in at cheaper costs are getting more profits from refis. A lot of rental housing in San Diego is also poorly maintained. Lastly we have pretty stagnant property taxes so if you got into the house at $300k you aren’t paying much more in taxes when it goes to $600k value thanks to prop 13. This discourages moving. Two of my direct neighbors have bigger houses and paid less than $100k.

To your point though, it’s not an attractive rent to purchase price proposition here for investors. But really a lot of that has dried up thanks to cheap loans and short term rentals.
JackoC
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Re: Girlfriend paying rent

Post by JackoC »

RudyS wrote: Sun Jun 07, 2020 4:02 pm How does a "landlord" make any money at those high multiples? It used to be, 1% of value of house per month in rent, to cover depreciation, return on investment, expenses, etc. I'm getting too old for these economics it seems.
As I mentioned before, per Zillow the rent multiple on my house is almost 70 (v OP's 33). To which one might naturally say 'maybe Zillow is way underestimating the rent you could get' (they have the market value close to correct I believe). But that just points to the lack of any solid source on the rent, because basically nobody rents places like ours. There isn't much of a tenant customer base looking to rent whole 1 family 120+ yr old brownstones, or many owners of them who'd want to rent them out rather than live in them. Multiples for more generic (you might live there, you might rent it out) properties like condo's are around 19 here. In NY next door Rent Stabilized buildings can go for less for 12, but that's because a) the RS rents are a some variable amount below market depending on the particular building, and b) landlords can't get any return upgrading those properties, so they don't, so the condition isn't comparable to new free market places. 'Law of one price' doesn't hold so well for different properties in this area when it comes to rent multiples. OP's property might be more generic, and I don't know if 33 is the right multiple, but it's not proof it's 'overvalued' or a 'greater fool' bubble.

It's always reasonable though to consider whether an owned place is too big or nice, and a smaller rental would be more suitable to your savings goals given relative rents and prices. Although, it would be strange if rent multiples (which are related to stock multiples and inversely to bond yields) were as low as traditionally in general when stock PE multiples and bond yields are so much higher and lower respectively than they were traditionally.
oldfort
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Re: Girlfriend paying rent

Post by oldfort »

investing engineer wrote: Sun Jun 07, 2020 4:02 am There was a huge debate on Reddit https://www.reddit.com/r/personalfinanc ... n_of_rent/
A lot of the responses were along the lines of few people get audited by the IRS, so tax evasion is unlikely to be discovered. This might be true, but doesn't answer the question of what the law requires.
oldfort
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Re: Girlfriend paying rent

Post by oldfort »

scubadiver wrote: Sat Jun 06, 2020 8:26 pm
oldfort wrote: Sat Jun 06, 2020 5:17 pm
scubadiver wrote: Sat Jun 06, 2020 4:58 pm I think you have reached a reasonable agreement for sharing expenses with your girlfriend.

I also don't think you need to report this to the IRS. It's your girlfriend, you're in a long-term relationship and you're sharing reasonable expenses. End of story.
Paying rent to the owner of the property is not sharing expenses when he is the sole owner. There's nothing in the IRS pubs which create an exception for girlfriends or those in long term relationships. If they weren't dating, and he had a roommate, could anyone claim the rent didn't qualify as income?
It's not rent. She's contributing her share to household expenses. There is no lease, reaffirming that it is not rent. Sharing expenses in this manner is a perfectly reasonable arrangement for a non-marital but cohabitating couple.
Show me something in the US code, an IRS publication, or a court case substantiating this wouldn't be considered rent. A lease is not necessary to have rental income. A landlord-tenant relationship can be created by an oral agreement between the parties. What does being a cohabitating couple have to do with anything? The IRS doesn't care about the OP's sex life.
scubadiver
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Re: Girlfriend paying rent

Post by scubadiver »

oldfort wrote: Sun Jun 07, 2020 5:50 pm The IRS doesn't care about the OP's sex life.
Exactly. Which is why the OP should have no concern about the IRS giving him grief because his girlfriend splits the household expenses with him. 8-)
simas
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Re: Girlfriend paying rent

Post by simas »

scubadiver wrote: Sun Jun 07, 2020 6:51 pm
oldfort wrote: Sun Jun 07, 2020 5:50 pm The IRS doesn't care about the OP's sex life.
Exactly. Which is why the OP should have no concern about the IRS giving him grief because his girlfriend splits the household expenses with him. 8-)
bragging?

The entire question is weird to me - why would anyone go to some internet forum to determine what they should and should not do with/together with their girlfriend?? may be I am too old to understand..
abat.rama
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Re: Girlfriend paying rent

Post by abat.rama »

I say she pays $0 for rent but shares other costs (cable, electricity, grocery, etc.)
sailaway
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Re: Girlfriend paying rent

Post by sailaway »

simas wrote: Sun Jun 07, 2020 7:03 pm
scubadiver wrote: Sun Jun 07, 2020 6:51 pm
oldfort wrote: Sun Jun 07, 2020 5:50 pm The IRS doesn't care about the OP's sex life.
Exactly. Which is why the OP should have no concern about the IRS giving him grief because his girlfriend splits the household expenses with him. 8-)
bragging?

The entire question is weird to me - why would anyone go to some internet forum to determine what they should and should not do with/together with their girlfriend?? may be I am too old to understand..
Moreover, why does someone go to the internet to ask if it is OK to ask for more after an agreement has already been made.
neverpanic
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Re: Girlfriend paying rent

Post by neverpanic »

Bottom line: he does not yet earn enough for the IRS to care. The gf has already paid income tax on whatever she gives to him, and regardless of the purpose for which it is used in their shared home.
I am not a financial professional or guru. I'm a schmuck who got lucky 10 times. Such is the life of the trader.
oldfort
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Re: Girlfriend paying rent

Post by oldfort »

scubadiver wrote: Sun Jun 07, 2020 6:51 pm
oldfort wrote: Sun Jun 07, 2020 5:50 pm The IRS doesn't care about the OP's sex life.
Exactly. Which is why the OP should have no concern about the IRS giving him grief because his girlfriend splits the household expenses with him. 8-)
You missed the point. If they weren't dating and he had a roommate paying $1500/month to live there, wouldn't everyone think it was ridiculous he could get out of paying income taxes by calling the rental income he received shared household expenses, including insurance, property taxes, and maintenance on the property? From IRS pub 527:
Rental income is any payment you receive for the use or occupation of property. It isn’t limited to amounts you receive as normal rental payments.
The GF is paying the OP in order to use and occupy the property. Therefore, it's income according to IRS pub 527.
Cruise
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Re: Girlfriend paying rent

Post by Cruise »

OP: Some 40 years ago, when my gf and I started to live together, we split all expenses 50/50. This was by design, as we wanted to be co-equals in the relationship. When we got married five years later, we merged all of our accounts and the rest is history.

This is an opportune time for you two to have a nice talk about your respective visions of your relationship, and make decisions based on a shared vision.

Good luck.
sd323232
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Re: Girlfriend paying rent

Post by sd323232 »

simas wrote: Sun Jun 07, 2020 7:03 pm
scubadiver wrote: Sun Jun 07, 2020 6:51 pm
oldfort wrote: Sun Jun 07, 2020 5:50 pm The IRS doesn't care about the OP's sex life.
Exactly. Which is why the OP should have no concern about the IRS giving him grief because his girlfriend splits the household expenses with him. 8-)
bragging?

The entire question is weird to me - why would anyone go to some internet forum to determine what they should and should not do with/together with their girlfriend?? may be I am too old to understand..
are you on the right post? question was about his gf paying rent....
mesaverde
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Re: Girlfriend paying rent

Post by mesaverde »

OP:
I was in your girlfriend's shoes (I was living with my girlfriend in her home) for 6 years. This was a source of tension for us as well. It was hard to reach a dollar amount that each of us thought was fair. In the beginning we both had the idea that our relationship would lead to marriage (& the combining of our finances, which would have solved this). But that never ended up happening... in part because we didn't plan on having children & marriage really wouldn't have changed much in regard to our relationship.
I paid her monthly "rent" by paying down her credit card bill by a certain amount each month (she made most purchases with it).

One thing you may want to consider is the fact that your girlfriend is giving up her autonomy to live in your home, and possibly your rules which go along with that.
Best wishes!
"Learn from the past, live in the present, plan for the future"
simas
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Re: Girlfriend paying rent

Post by simas »

sd323232 wrote: Mon Jun 08, 2020 5:23 am
simas wrote: Sun Jun 07, 2020 7:03 pm
scubadiver wrote: Sun Jun 07, 2020 6:51 pm
oldfort wrote: Sun Jun 07, 2020 5:50 pm The IRS doesn't care about the OP's sex life.
Exactly. Which is why the OP should have no concern about the IRS giving him grief because his girlfriend splits the household expenses with him. 8-)
bragging?

The entire question is weird to me - why would anyone go to some internet forum to determine what they should and should not do with/together with their girlfriend?? may be I am too old to understand..
are you on the right post? question was about his gf paying rent....
that is the confusion - which one is it, gf or renter?
- if they are partners living together in a household, sharing expenses, sleeping together ,etc what does rent/lease/landlord regulations have to do with this?? if my partner in the past would hear from me such BS (lets sign lease, etc), then FU and GFU would be likely and imho proper responses..

- if they are landlord/renter then (a) he should not sleep with renters (b) there is no household/partnership relationship here. just random lay with willing adult who happens to be in business relationship with you...

which one is it? pick one and move on.

I am not relationship expert and give no relationship advice. I hope it works out for OP and his gf whichever way they would like to go.. it is just the entire thing is very weird to me (thus earlier comment of may be I am too old to understand this not being 20-30-whatever)
JackoC
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Re: Girlfriend paying rent

Post by JackoC »

oldfort wrote: Sun Jun 07, 2020 5:50 pm
scubadiver wrote: Sat Jun 06, 2020 8:26 pm
oldfort wrote: Sat Jun 06, 2020 5:17 pm
scubadiver wrote: Sat Jun 06, 2020 4:58 pm I think you have reached a reasonable agreement for sharing expenses with your girlfriend.

I also don't think you need to report this to the IRS. It's your girlfriend, you're in a long-term relationship and you're sharing reasonable expenses. End of story.
Paying rent to the owner of the property is not sharing expenses when he is the sole owner. There's nothing in the IRS pubs which create an exception for girlfriends or those in long term relationships. If they weren't dating, and he had a roommate, could anyone claim the rent didn't qualify as income?
It's not rent. She's contributing her share to household expenses. There is no lease, reaffirming that it is not rent. Sharing expenses in this manner is a perfectly reasonable arrangement for a non-marital but cohabitating couple.
Show me something in the US code, an IRS publication, or a court case substantiating this wouldn't be considered rent. A lease is not necessary to have rental income. A landlord-tenant relationship can be created by an oral agreement between the parties. What does being a cohabitating couple have to do with anything? The IRS doesn't care about the OP's sex life.
Show me something in the US code, an IRS publication, or a court case substantiating this *would* be considered rent. :happy These obscure tax questions often come down to setting the burden of proof. Your is implicitly set as 'if you can possibly construe something as taxable income, then it is, unless someone else can firmly prove it's not'. I don't share that view.

I do take your point that many of the arguments on the reddit thread, and similar debates here, focus too much on the likelihood of the IRS challenging you *assuming you're breaking the rules*. But let's differentiate two aspects. Say you take a side job for significant cash and don't report that as income. You probably won't get caught. However, the IRS challenges people on this innumerable times in a given year. There is no reasonable doubt *they* consider it to be a violation of the law worthy of their attention. But again, show me any case where the IRS challenged pairs of housemates, one of whom owned the house, who exchanged expense sharing payments, saying the payments should have been recorded as rent paid to the one who owned the house. The fact that there are no known such cases, unless you can provide one, is a piece of information IMO about whether this is really rent or taxable income in any practical sense. It's not simply a matter of the authorities not being able to catch everyone who breaks the rules, as it is in the unreported cash wage income case.

Also I think you're confused on the 'sex life' aspect. The main relevant fact is that the two people share the living space, not what their personal relationship is. If you lease a space to somebody else to be *their* specific living space, what you collect from them is clearly rent. Likewise even if it's a particular room without a separate entrance. But sharing a whole living space, whatever the personal relationship, is what opens the legitimate path of saying that exchanged payments are shared expenses, if that actually fits. Which per the first post of the thread, it does in this case. Although as I also said earlier, among other odd aspects of this discussion (why ask for advice about a done deal?), OP has seemed to almost want to create a (theoretical, perhaps at least) tax problem by also talking about 'rent' and 'fair market value'. But if you just focus on the original sentence, "she is just trying to help with costs. I kind of figure taxes, insurance, utilities, and maintenance is up around $1500." $750 is a 50% share of recurring expenses not taxable income, the way I look at things, unless there's a code provision, publication or court case specifically dealing with this very common situation and saying it *is* taxable income.
RudyS
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Re: Girlfriend paying rent

Post by RudyS »

Thanks ohboy and jacko for the explanation of rental price setting.
IMO
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Re: Girlfriend paying rent

Post by IMO »

So let's say you go the official rent route vs. expense sharing. That complicates your financial situation with things like fair market rate charged, required depreciation, etc.

If she's is officially renting 1/2 the house, then should you break up, she wouldn't be required to leave until you gave her 30 days notice (presuming it's month to month). Additionally, there could be other tenant favorable aspects that could make evicting her a difficult and long process. In the meantime, since she's just a tenant, she is allowed to bring other's into the house including her new boyfriend(s).

IF this is a serious girlfriend that you both see having a more serious future together, this whole situation is a test on how you each visualize your financial contributions/responsibilities as a couple. It will tell you a great deal.

Please post how the discussion goes, curious how this ends up for you. :sharebeer
Caduceus
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Re: Girlfriend paying rent

Post by Caduceus »

I had a similar discussion with my boyfriend much earlier on when I moved into his place. He had already paid for the entire apartment (this was before we got engaged) so he didn't see the point of my paying him any rent. Our conversation was quite funny and went something like this:

Me: "The fair market value of a room in this apartment would be SX"
Him: "But I'm not renting it out to you. You're moving in with me."
Me: "Yes, but I'm living in a space that you would otherwise be able to rent out for $X, therefore I should pay SX."
Him: "But you're not renting a separate room. You're in my room."
Me: "Yes, but technically, I'm staying in a place I don't own, so I'm renting space of some sort."
Him: "Yes, but you're not renting the place from me. You're my boyfriend and you're moving in with me ..."

This went on in circles for a while until we decided that the fairest thing to do (since he refused to take rent money) was that I'd pay for all the miscellaneous expenses. It still wasn't equitable because what I was paying for wasn't anywhere near the rent. As long as there's good communication going on, I think the relationship is more important than considerations of fairness. For us, it was an early sign that we wouldn't have too much trouble in financial compatibility as both of us early on were always trying to give the other the better "deal" so to speak.
dbr
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Re: Girlfriend paying rent

Post by dbr »

As to the question of fair, whatever two people agree to fully informed and without coercion is fair. The fully informed part evidently involves some consideration as above. As to coercion, well?
deltaneutral83
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Re: Girlfriend paying rent

Post by deltaneutral83 »

Come up with a set amount mutually agreed upon every month and have her Venmo you once a month. If she's paying $750 a month currently plus utilities at a place that isn't as nice, then obviously that should be the starting point dollar wise, but as mentioned, she doesn't need to be paying half of market rent for your place because that's not what is literally happening because you own it. Ticky tack charges for everything under the sun will most likely be problematic. You're going to get groceries regardless if you all both rent or one of you owns, that aspect shouldn't be factored in. One set amount of rent that covers the rent/utilities. Everything else is a la carte, and if it becomes a problem, splitting the cost of mustard isn't worth the hassle IMO.
TSR
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Re: Girlfriend paying rent

Post by TSR »

Buddy, this is all fine. Your price is fine, you'll have no trouble with the IRS, etc. There are probably a million people across the country doing this same thing, and they are all trying to find the right balance. You've already found a reasonable price --- on the one hand, she is paying half the ownership costs, which might seem like a lot for a mere cost-sharing arrangement; on the other hand, if you suddenly had to replace the roof or make some capital improvement it's not like you're going to charge her for half of that, so she bears no risk of ownership. You'll learn a lot about each other co-habitating, including through this cost-sharing arrangement. Enjoy it, don't think too much about it, and hopefully it'll all work out for the best!
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SmileyFace
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Re: Girlfriend paying rent

Post by SmileyFace »

Rent is income - yes (Especially if she claims it as a deduction on her taxes).
montanagirl
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Re: Girlfriend paying rent

Post by montanagirl »

From the IRS:

"Report your not-for-profit rental income on Schedule 1 (Form 1040), line 21 or Form 1040NR, line 21. If you itemize your deductions, include your mortgage interest (if you use the property as your main home or second home), real estate taxes, and casualty losses from your not-for-profit rental activity when figuring the amount you can deduct on Schedule A."

He can't take losses.

Question is, is OP collecting rent it or simply sharing expenses with a roommate? As owner it might lean more toward tent.
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ohboy!
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Re: Girlfriend paying rent

Post by ohboy! »

montanagirl wrote: Wed Jun 10, 2020 11:20 am As owner it might lean more toward tent.
For the price it's not the nicest house, but it's a big better than a tent
oldfort
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Re: Girlfriend paying rent

Post by oldfort »

JackoC wrote: Mon Jun 08, 2020 8:49 am
oldfort wrote: Sun Jun 07, 2020 5:50 pm
scubadiver wrote: Sat Jun 06, 2020 8:26 pm
oldfort wrote: Sat Jun 06, 2020 5:17 pm
scubadiver wrote: Sat Jun 06, 2020 4:58 pm I think you have reached a reasonable agreement for sharing expenses with your girlfriend.

I also don't think you need to report this to the IRS. It's your girlfriend, you're in a long-term relationship and you're sharing reasonable expenses. End of story.
Paying rent to the owner of the property is not sharing expenses when he is the sole owner. There's nothing in the IRS pubs which create an exception for girlfriends or those in long term relationships. If they weren't dating, and he had a roommate, could anyone claim the rent didn't qualify as income?
It's not rent. She's contributing her share to household expenses. There is no lease, reaffirming that it is not rent. Sharing expenses in this manner is a perfectly reasonable arrangement for a non-marital but cohabitating couple.
Show me something in the US code, an IRS publication, or a court case substantiating this wouldn't be considered rent. A lease is not necessary to have rental income. A landlord-tenant relationship can be created by an oral agreement between the parties. What does being a cohabitating couple have to do with anything? The IRS doesn't care about the OP's sex life.
Show me something in the US code, an IRS publication, or a court case substantiating this *would* be considered rent. :happy These obscure tax questions often come down to setting the burden of proof. Your is implicitly set as 'if you can possibly construe something as taxable income, then it is, unless someone else can firmly prove it's not'. I don't share that view.

I do take your point that many of the arguments on the reddit thread, and similar debates here, focus too much on the likelihood of the IRS challenging you *assuming you're breaking the rules*. But let's differentiate two aspects. Say you take a side job for significant cash and don't report that as income. You probably won't get caught. However, the IRS challenges people on this innumerable times in a given year. There is no reasonable doubt *they* consider it to be a violation of the law worthy of their attention. But again, show me any case where the IRS challenged pairs of housemates, one of whom owned the house, who exchanged expense sharing payments, saying the payments should have been recorded as rent paid to the one who owned the house. The fact that there are no known such cases, unless you can provide one, is a piece of information IMO about whether this is really rent or taxable income in any practical sense. It's not simply a matter of the authorities not being able to catch everyone who breaks the rules, as it is in the unreported cash wage income case.

Also I think you're confused on the 'sex life' aspect. The main relevant fact is that the two people share the living space, not what their personal relationship is. If you lease a space to somebody else to be *their* specific living space, what you collect from them is clearly rent. Likewise even if it's a particular room without a separate entrance. But sharing a whole living space, whatever the personal relationship, is what opens the legitimate path of saying that exchanged payments are shared expenses, if that actually fits. Which per the first post of the thread, it does in this case. Although as I also said earlier, among other odd aspects of this discussion (why ask for advice about a done deal?), OP has seemed to almost want to create a (theoretical, perhaps at least) tax problem by also talking about 'rent' and 'fair market value'. But if you just focus on the original sentence, "she is just trying to help with costs. I kind of figure taxes, insurance, utilities, and maintenance is up around $1500." $750 is a 50% share of recurring expenses not taxable income, the way I look at things, unless there's a code provision, publication or court case specifically dealing with this very common situation and saying it *is* taxable income.
If the OP wants a definitive answer, he should consult a tax attorney. Let's look at IRS pub 527:
Rental income is any payment you receive for the use or occupation of property. It isn’t limited to amounts you receive as normal rental payments.
Is paying $1500/month a payment for the use or occupation of the property? The answer to that in my mind is unambiguously yes.
RudyS
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Re: Girlfriend paying rent

Post by RudyS »

This was a simple relationship question (or not so simple) till we got into a polemic on whether cost sharing is really rent. One of my favorite quotes is "My mind is made up, don't confuse me with facts." Just change the title of the thread, and go have some fun.
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Prokofiev
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Re: Girlfriend paying rent

Post by Prokofiev »

halfnine wrote: Sat Jun 06, 2020 4:40 pm


When I moved in with my SO they originally wanted to charge me market rates. At which point, fair being fair, I offered to buy the place off them and charge them market rates. They, obviously, weren't so fond of that idea and so we settled on a more reasonable arrangement.
Cool. How many significant others were involved in this??

I am in my 60's and still pay my girlfriend rent each month. It is not taxable because we don't call it rent.
Everything should be made as simple as possible, but not simpler - Einstein
sailaway
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Re: Girlfriend paying rent

Post by sailaway »

I do not expect the IRS to go out and start hounding a bunch of people sharing their residences, especially not the ones who charge less than market rates, yet neglected to fill out the forms showing that they didn't collect a profit and can't take any deductions, therefore it has zero effect on taxes.

However, "It isn't X because we don't call it X" is bog standard tax fraud territory.
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Re: Girlfriend paying rent

Post by geerhardusvos »

ohboy! wrote: Sat Jun 06, 2020 3:38 pm Curious how other people might think best to handle this scenario. I have been with my GF for over 3 years. The past 2 years she has stayed at my place 90% of the time. I own a small house in Southern California which cost me $600k in 2018. Having sold some investment properties I don’t owe much on the house but the monthly payment is $2200 with $650 or so being property taxes. My GF was renting a room for $550 but that’s a deal from probably 6 years ago. Prices in my area are more like $750 now with a shared bathroom. Anyways, we have agreed she will move in and pay me $750 a month. Just the two of us in the house. She actually makes quite a bit more than me but has student loans. Even with the loans she could afford $2k a month. I figure that’s probably about half of the real cost of my house ($4k a month total). But she isn’t buying in, she is just trying to help with costs. I kind of figure taxes, insurance, utilities, and maintenance is up around $1500. I think we are settled on the deal. Though I keep asking myself if it’s fair. One thing I haven’t figured out is if Ill have to claim her rent on my taxes. Any experience from Bogleheads on moving in and collecting “rent” from a SO?
Don’t charge your girlfriend rent... have her make the meals or something to chip in, but come on... i’ve never made my wife pay for one thing even when we were dating. And she made more than me for a while too... [OT comment removed by admin LadyGeek]
VTSAX and chill
RudyS
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Re: Girlfriend paying rent

Post by RudyS »

Prokofiev wrote: Wed Jun 10, 2020 10:28 pm
halfnine wrote: Sat Jun 06, 2020 4:40 pm


When I moved in with my SO they originally wanted to charge me market rates. At which point, fair being fair, I offered to buy the place off them and charge them market rates. They, obviously, weren't so fond of that idea and so we settled on a more reasonable arrangement.
Cool. How many significant others were involved in this??

I am in my 60's and still pay my girlfriend rent each month. It is not taxable because we don't call it rent.
LOL! Nowadays, there is a movement to avoid gender-specific pronouns, or to let people chose which one fits them. "They" is an attempt to be inclusive. Some people put their pronouns on emails as part of their signature. This just came in today:
"pronouns: he/him/his" That sender happens to be gay.
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ohboy!
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Re: Girlfriend paying rent

Post by ohboy! »

geerhardusvos wrote: Wed Jun 10, 2020 10:58 pm
ohboy! wrote: Sat Jun 06, 2020 3:38 pm Curious how other people might think best to handle this scenario. I have been with my GF for over 3 years. The past 2 years she has stayed at my place 90% of the time. I own a small house in Southern California which cost me $600k in 2018. Having sold some investment properties I don’t owe much on the house but the monthly payment is $2200 with $650 or so being property taxes. My GF was renting a room for $550 but that’s a deal from probably 6 years ago. Prices in my area are more like $750 now with a shared bathroom. Anyways, we have agreed she will move in and pay me $750 a month. Just the two of us in the house. She actually makes quite a bit more than me but has student loans. Even with the loans she could afford $2k a month. I figure that’s probably about half of the real cost of my house ($4k a month total). But she isn’t buying in, she is just trying to help with costs. I kind of figure taxes, insurance, utilities, and maintenance is up around $1500. I think we are settled on the deal. Though I keep asking myself if it’s fair. One thing I haven’t figured out is if Ill have to claim her rent on my taxes. Any experience from Bogleheads on moving in and collecting “rent” from a SO?
Don’t charge your girlfriend rent... have her make the meals or something to chip in, but come on... i’ve never made my wife pay for one thing even when we were dating. And she made more than me for a while too... [OT comment removed by admin LadyGeek]
It’s 2020 bud. I make the meals, she brings home the bacon. Your reply is silly.
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geerhardusvos
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Re: Girlfriend paying rent

Post by geerhardusvos »

ohboy! wrote: Thu Jun 11, 2020 11:14 am
geerhardusvos wrote: Wed Jun 10, 2020 10:58 pm
ohboy! wrote: Sat Jun 06, 2020 3:38 pm Curious how other people might think best to handle this scenario. I have been with my GF for over 3 years. The past 2 years she has stayed at my place 90% of the time. I own a small house in Southern California which cost me $600k in 2018. Having sold some investment properties I don’t owe much on the house but the monthly payment is $2200 with $650 or so being property taxes. My GF was renting a room for $550 but that’s a deal from probably 6 years ago. Prices in my area are more like $750 now with a shared bathroom. Anyways, we have agreed she will move in and pay me $750 a month. Just the two of us in the house. She actually makes quite a bit more than me but has student loans. Even with the loans she could afford $2k a month. I figure that’s probably about half of the real cost of my house ($4k a month total). But she isn’t buying in, she is just trying to help with costs. I kind of figure taxes, insurance, utilities, and maintenance is up around $1500. I think we are settled on the deal. Though I keep asking myself if it’s fair. One thing I haven’t figured out is if Ill have to claim her rent on my taxes. Any experience from Bogleheads on moving in and collecting “rent” from a SO?
Don’t charge your girlfriend rent... have her make the meals or something to chip in, but come on... i’ve never made my wife pay for one thing even when we were dating. And she made more than me for a while too... [OT comment removed by admin LadyGeek]
It’s 2020 bud. I make the meals, she brings home the bacon. Your reply is silly.
paying taxes twice on that bacon is the real silliness here
VTSAX and chill
JackoC
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Re: Girlfriend paying rent

Post by JackoC »

oldfort wrote: Wed Jun 10, 2020 12:14 pm
JackoC wrote: Mon Jun 08, 2020 8:49 am
oldfort wrote: Sun Jun 07, 2020 5:50 pm Show me something in the US code, an IRS publication, or a court case substantiating this wouldn't be considered rent.
Show me something in the US code, an IRS publication, or a court case substantiating this *would* be considered rent. :happy
1. If the OP wants a definitive answer, he should consult a tax attorney. Let's look at IRS pub 527:
1. Rental income is any payment you receive for the use or occupation of property. It isn’t limited to amounts you receive as normal rental payments.
Is paying $1500/month a payment for the use or occupation of the property? The answer to that in my mind is unambiguously yes.
1. A tax attorney would highly likely either say '100% it's no problem, do not report it', or 'I can't tell you 100% for sure'. That's not worth paying for IMO, in a case where a tax problem is as far fetched as the one theorized here.

2. Comes down to 'use or occupancy' definition, a renters own use and not the owners, v a housemate situation where the owner occupies the whole space also, no part of it exclusive to the housemate.

Again, everyone is free to make their own choices about marginal theoretical tax problems. But again, show me any case where the IRS has found that housemate expense sharing is rent to the one who owns the house, and especially been upheld on it in court, and I would worry about this. Otherwise I would not.
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