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August 29, 2008 7:00 AM

Landlord boyfriend ponders tax issues

Posted by Elizabeth Rhodes

Q: My girlfriend and I are living in the town house I own and she's paying me $500 a month in rent --something less than the going rate in our neighborhood -- plus half the utilities. How do I account for this taxwise?

A: The IRS requires you to declare the $500 a month as income, says Colleen Duce of Duce Taxes & Accounting in Marysville. (It's possible you won't have to declare the utility money; you'd have to do a specific tax analysis to know that.)

You're also eligible for rental expense write-offs. However, the deductions for expenses "can't be greater than the income you receive when you live in the same house as the person who's renting from you," says Duce.

There also are rules about the order in which you must take expenses and depreciation when doing your taxes. Duce says you can figure this out on your own using IRS information. But because it's complicated you might want to use a tax pro at least the first year.

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