When you share a living space with a roommate, your income tax return should only be affected in certain situations. Depending on the relationship you share with your roommate and your state of residence, your filing status could be a consideration. Further details, such as the financial arrangements governing household bill payments, must also be considered when filing a tax return.
Filing Status
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If your roommate is actually your life partner and the two of you live in a state that accepts common law marriage or began your relationship in such a state, the IRS will accept a filing status of "Married, filing jointly" on your return. In situations where your roommate is your child, parent or a relative who meets all IRS requirements for a qualifying person as laid out in Publication 17, Tax Guide for Individuals, you can claim "Head of household" as your filing status if additional guidelines are met. These guidelines include your being unmarried on the last day of the tax year while being responsible for more than half of the home expenses. When your living situation with your roommate meets neither of these requirements, use "Single" as your filing status.
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Shared Expenses
When sharing a rented apartment or home with a roommate, use a 50/50 split to pay rent and utility bills. When you and your roommate evenly divide expenses, the IRS considers this "shared expenses" should an audit of your or your roommate's finances occur. If you are the roommate who actually writes the rent check for the landlord and receives reimbursement from the other party, ask your roommate to sign a receipt or write a memo on their check that specifies the money paid to you is reimbursement for their half of the rent or a given utility bill.
Renting to a Roommate and Income
When you rent a room in your home, you must claim the money paid to you as rental income on your tax return. If you have a roommate within your apartment who pays a disproportionate amount of rent for the space occupied within your dwelling, you must claim the money paid to you as rental income as this falls outside of the definition of "shared expenses."
Renting to a Roommate and Deductions
When you claim rental payments as income, you can claim expenses related to the rental as deductions on your tax return. For example, the cost of installing a phone line or cable line to that room for your renter are 100 percent deductible as are improvement expenses, such as a new coat of paint or replacement carpeting when one tenant moved out and another moved in. You can also deduct a portion of your utility and mortgage payments as rental expenses. To do this you must take the number of square feet in your home and divide that amount by the square feet of the rental space to arrive at the portion of your home allotted to the rental. For example, a 1000-square-foot living space with a 200-square-foot rented space would have 20 percent of its space dedicated to the rental. Twenty percent of your utility bills and mortgage payments are deemed rental expenses.