Should we rent the apartment above our garage in exchange for free cleaning?

Dear Quentin,

My wife and I are both in the mid-70s and it’s unlikely we will downsize our current home, which has three bedrooms and offers one-story living. The house also includes a 540 square foot guest suite on the second level above our garage, with a separate entrance.

I told my wife that at some point we might consider making a deal with a student or someone willing to swap living space for agreed housework.

How practical are such arrangements and would we run into tax and related issues that pose potential liability? I would love to learn more about the pitfalls and even become more educated so that I can ask a lawyer smart questions if the idea is worth considering.

Explore options

Dear explorer,

It would generally be a good idea to rent the unused apartment above your garage, since you don’t have any plans or need to downsize. But think twice if you don’t need the money. If you’ve taken the route you suggest, you’ll likely need to report your arrangement to the Internal Revenue Service.

The IRS refers to such agreements as “barter of goods and services.” That is, there is an exchange of goods and services (in this case apartment and housekeeping duties) but they have a fair market value. Your tenant / housekeeper would get a good deal.

“You must include in the gross income for the year of receipt the fair market value of the goods or services received from barter,” according to the IRS. “Usually there is no exchange of cash. An example of bartering is a plumber who trades plumbing services for the dental services of a dentist.

You can read more about it here.

However, I have concerns. First, you’ll end up choosing someone (and vice versa) who needs a place to live over someone who actually wants to be your housekeeper. Second, if that doesn’t work, they still live above your garage.

It is an unnecessary blurring of borders and responsibilities. If you want to use your apartment, I suggest you rent it out to someone with a lease and avoid any occasional arrangements that could legally put you at risk if, for example, that person had an accident on your property.

Walk carefully.

You can email The Moneyist for any financial and ethical questions related to the coronavirus at [email protected], and follow Quentin Fottrell on Twitter.

By sending your questions by email, you agree that they will be posted anonymously on MarketWatch. By submitting your story to Dow Jones & Company, the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including through third parties.

Check the private Facebook Moneyist

FB,
-0.01%
group, where we seek answers to life’s toughest money problems. Readers write to me with all kinds of dilemmas. Post your questions, tell me what you want to know more about or weigh in on the latest Moneyist columns.

More from Quentin Fottrell:




Source link

About Ian Crawford

Check Also

COVID-19: Salvation Army calls for rent freeze, government assistance as demand for food and housing support skyrocket

The briefing illustrates the plight of Kiwis struggling with the stress of foreclosure, including those …