My sister bought my mother’s home from under me. It was a two family home. My sister lived in one apartment and I lived with my mother and two kids in the other apartment. My mother never asked for any money. After she died and my sister sold the house she charged me $185,000 in back rent which she took from the little bit of money she was giving me for helping remodel the house. Can I claim that in my taxes?
asked Nov 15, 2023 at 17:42
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39Did you have an actual rental agreement? I would be surprised if the $185k would actually be legal if you were totally unaware of any "contract".– NosjackCommented Nov 15, 2023 at 17:55
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16What jurisdiction are you in? Tax laws vary around the world and this is an international site.– VickyCommented Nov 15, 2023 at 20:42
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4If you ignore the specific details, does your local tax jurisdiction allow deductions for rent, or not? Almost separately, how does '$185,000… she took from the little bit of money…' work? You seem to suggest $185,000 is merely part of a 'little bit.'– Robbie GoodwinCommented Nov 16, 2023 at 23:33
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4If my sister pulled that, I would just refuse to leave. The sister would be in a terrible position. There is no proper rental agreement and the free rent was utterly reasonable given the family relationship, and the sister has never served notice in writing of a rent increase, so the owed rent is zero and the basis for rent control is zero. So to remove you, they would need to go through an eviction process, and with a little help from a lawyer you can stretch that out for a year or more. Eventually you just bring them to their knees and you say "I will leave willingly for a $X payment".– Harper - Reinstate MonicaCommented Nov 17, 2023 at 0:55
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5Could you add some info on where you are located? From the fact you use $, it could be Australia, Bahamas, Barbados, Belize, Bermuda, Brunei, Canada, Fiji, Hong Kong, Liberia, Namibia, New Zealand, Singapore, Suriname, Taiwan, USA, Ecuador, El Salvador, or a number of other countries. Although the talk to a lawyer answer certainly holds, people need to know your country to answer your question.– gerritCommented Nov 17, 2023 at 8:29
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6 Answers
This is way too complex for a DIY. You need an attorney ASAP. With the amounts involved (hundreds of thousands of dollars), you may be able to get an attorney on commission (i.e.: you don't pay upfront).
Several points to consider when you talk to the attorney:
- Back rent of $185K seems pretty excessive. I assume the period between your mother's passing and selling the house was not decades, so this amount doesn't seem reasonable to me by any means even if you owed rent.
- Your mother never asked for rent. Once your sister took possession of the house, has this been renegotiated? If not - you owe no rent. In fact, depending on local laws, you may be entitled for compensation due to your landlord (your sister) evicting you.
- How did your sister come to own the house anyway? Was it left to her in the will? If not, shouldn't you own part of it as the other heir of your mother?
- Renovations - your contribution may establish basis and ownership stake in the house.
This is not at all trivial, and you should most definitely hire a proper and qualified legal counsel.
answered Nov 15, 2023 at 19:23
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1The question says the sister bought the house. Sounds like she either bought it from the estate, or they both inherited it and she bought his share.– BarmarCommented Nov 16, 2023 at 15:16
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28Yeah, and both options sound iffy to me, honestly. I suspect some abuse/manipulation/dishonesty involved and a lawyer would most definitely be helpful. Commented Nov 16, 2023 at 16:36
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@Barmar I think sister bought the house from mother (while she was still alive), and is now trying to get backrent from brother from the time he lived with mother. But in that scenario brother is "renting" (for free) by mother, and mother would be renting from sister (I would have expected a provision at selling time that mother would not need to pay such rent, though). Brother would have no responsibility for the time he was living with mother, if sister had any claim, she should have brought that up with mother.– ÁngelCommented Nov 18, 2023 at 2:36
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1The whole scenario looks very suspicious, though, smells like sister getting advantage of her old mother (and, indirectly from her brother by depriving him from his inheritance) to put the house title(s) under her own name.– ÁngelCommented Nov 18, 2023 at 2:37
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1@Ángel It's more likely 2 sisters than a sister and a brother.– CœurCommented Nov 19, 2023 at 8:15
I think you can't be charged "back rent". For most of the time you were there your mother owned the house and so could live there rent free. If she allowed you to live in the same apartment rent free she is allowed to. That's her business and not your sisters. Your sister absolutely cannot arbitrarily decide you owe rent for a period when she didn't own the house. In fact unless you signed an agreement with your sister she can't enforce rent even for the period she did own the house. However all of that is just my opinion and I could be wrong. You absolutely need to talk to a lawyer.
The other question is whether you had a written agreement for what you were to be paid for "helping with the renovation". If you didn't, then even if your sister can't charge you rent, she can claim she doesn't have to pay you for the renovation, which amounts to the same thing. Or of course if you are OK with this situation then just let it go. Or agree with your sister what is fair.
About the taxes: the money you were paid for the renovation would have been taxable income. If you aren't getting it then you won't pay taxes on it. If you agree with you sister to consider the payment to be a reduced payment for renovations instead of a big payment with back rent taken out then you just pay tax on what you actually received (if anything).
answered Nov 15, 2023 at 18:02
Your question is so weird. You seem focused on the wrong thing. $185k in back rent sounds completely bonkers.
But to answer your literal question of "can I claim that on my taxes"; talk to a tax professional, but probably not. Your location matters for purposes of that law to say for certain.
But you're going to get the same response from them as on here. They're going to look at you like you have 8 eyes when you seem more concerned about writing off $185k rather than simply not having to pay it in the first place.
If you're receiving income and then turning around to pay it back to your sister, that could be two taxable transactions, once for your income and once for your sister's rental income (although if it's rent that is owing before your sister owned the house then it would seem to be rental income toward your mother's estate, may want to ask a lawyer). If you've decided this transaction is fair, you could talk to a lawyer to see if it can be legally contracted in a way that reduces the tax burden.
To answer the question in the headline: Unless it's a business expense, rent is not deductable. But the lawyer can confirm that for you too, or see if you can categorize some of it as something else.
I see too many missing pieces of data that I would want to provide any kind of advice. Likewise, any answers here are making a lot of assumptions.
IF you are not making any claims to ownership of the house, then the simple answer should be no that 185K is rental expense to you is not deductible. Possibly some may be if you were engaged in a business on the premises.
IF you are attempting to make a claim of ownership, I as an accountant would want to see deeds, purchase and sales documents, and possibly wills and estate rulings. This would help to establish what may be owe to you. Beyond this you'll need an attorney and the courts to enforce any findings.
Finally, IF your end goal is to have fun at your sister's expense, and this is the USA, then consider being an IRS whistle blower. I would almost be certain your sister didn't report the 185K as rental income, she may not have even properly reported the eventual sale of the property itself.
