Family buying house, I’m paying them back with interest. Lodgers to help pay back. Do I have to pay tax on their rent?
My family are buying me a house in my name which I will occupy with my partner. We are paying them back over 15 years with interest and taking in lodgers to help pay this back. The lodgers will pay rent each month but this will go straight to the family who has fronted the money, I will not see any of it. My question is, will this count as income through rent even though I won’t actually make any income from it? If so on my 19k a year salary the income tax will absolutely cripple me financially as will be losing half my actually income on tax.
- STEPHENLv 78 months agoFavorite Answer
The rent counts as income. You have to declare it for tax purposes.
However, if no-one tells the tax people, how will they know?
- Beverly SLv 78 months ago
Yes. Regardless of what you use the rent for it IS rental income. Even if you never see it, it is benefiting you.
- babyboomer1001Lv 78 months ago
Yes. You have to declare it as income and that means, you will pay taxes on your income.
- StephenWeinsteinLv 78 months ago
Yes. You have to pay tax on the rent, even if you don't get to keep it. However, you can deduct real estate taxes (up to a recently imposed limit), probably the interest (if you've done this right, which I'm not sure you have), and maybe depreciation, maintenance, etc. You might actually end up getting to deduct more than the rent and paying less income tax with the house and the rent than you would with just your salary.
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- JudyLv 78 months ago
Yes you claim the lodgers' rent as income. You are getting the house! Their rent is helping you pay your family back for it.
- TavyLv 78 months ago
You do,in the UK. It is income. Have you done your sums ? You won't be loosing half your income in tax.
- 8 months ago
You will be receiving income from your lodgers and using this money to pay the family mortgage loan. The fact that this money passes directly from the lodgers to your family is not relevant, it is still your earned income. However, you will be able to offset reasonable expenses against this income. As Hunch says, your effective tax rate will be a lot lower than 50%.
Be sure to put the house in just your name. I hope your family insists on this. You never want to own a house with someone you are not married to because a breakdown of your relationship (more likely when you are not married) will leave a real estate nightmare. Family could find themselves with 'ex-partner' in residence. What happens when he stops making payments because he got angry when you dumped him? You would be hung out to dry. House and mortgage should both be in your name. 'Partner' can pay you rent.
- MarkLv 68 months ago
You need to talk with a tax accountant.
- EvaLv 78 months ago
It is rental income and must be treated as such. It doesn't matter that you didn't actually touch it. It's going to pay your debt. You should talk to a tax advisor about this arrangement.
- Casey YLv 78 months ago
Its income...even if you pass it through to pay expenses.
Now, you can deduct operating expenses from income for a rental property, but you still pay tax on the net.
If you own the home, this counts as income to you.
- A HunchLv 78 months ago
Yes, you are going to have to claim the rent money as income.
It will not make you lose 1/2 your income to tax.
If you only make $19,000 how are you going to afford maintenance and expenses of the house?