My close friend has just moved into an apartment with me and due to some circumstances he would like to pay me the rent money for a year upfront. The total amount will be about $11k total, and we as roommates pay our rent to the government (U.S.) online each month. I know there are limits on transactions that amount over $10k and I just have a couple questions:

1). If he gives me the amount in multiple increments so that no one transaction is over $9999, will the IRS care?

2). Are there any taxes or legal issues I should be aware of?

3). Lastly, this one isn't as important, but if I placed that money in security to get some interest would that change anything above?

Any insights into these or anything else I should be aware of would be greatly appreciated, thanks!

  • 52
    On 1, there is no limit on transactions over 10k, the bank just has to report them to the IRS if they are deposited as cash. You can receive a wire transfer/check over that no problem. However, you absolutely should not "structure" the transaction in such a way that it happens multiple times to avoid the 10k reporting limit if you handle it in cash, because that is a felony even if the reason for the transaction is legimitate! See: en.wikipedia.org/wiki/Structuring
    – BrianH
    Commented May 13, 2019 at 20:26
  • 35
    he would like to pay me the rent money for a year upfront why?
    – quid
    Commented May 13, 2019 at 20:53
  • 15
    @quid I also am concerned about unnamed 'circumstances'; understanding why someone acts oddly with money can be important. It may be as simple as that the roommate doesn't trust himself with the money, but that raises other issues to consider before cohabitating. Commented May 13, 2019 at 20:55
  • 49
    Thanks for replies guys! @quid without going into too much detail he has a drinking problem and he’s sober now but fears if he relapses he would spend what’s left of his money and not have enough for rent.
    – Asleepace
    Commented May 13, 2019 at 20:56
  • 42
    @Asleepace: sounds like your friend is taking a really sensible and responsible precaution by entrusting his rent money to you. Good on him for dealing with his condition so well, and good on you for being there to help him. Commented May 14, 2019 at 13:25

6 Answers 6


Short answer: you're ok, just deposit it all at once and keep records.

Long answer: the $10k rule is just what triggers an automatic bank report to the feds. Structuring the deposits into smaller amounts will be more trouble than it's worth, and could trigger the very audit you are trying to avoid! Since this amount is legitimate, don't worry about it.

Basically, your friend is paying back his share of the rent by giving you $10k. In arrears or in advance does not matter much as long as there is a clear explanation and paper trail. In the rare event that your taxes are audited by the IRS, you'll have to be able to explain why this $10k deposit is not income. As long as you have a rental agreement and your friend would attest that this money is him paying you back his share of the rent, you are fine.

Best would be if your friend writes you a check. Depositing that much cash is a red flag, does have reporting requirements, and the IRS may end up questioning the source of so much cash.

If you earn any interest in the meantime, that is a separate issue and would be just be taxed as interest income.

  • 16
    "Since this amount is legitimate, don't worry about it." Civil forfeiture is a thing, and I could understand how some people may want to avoid raising any flags even if everything is legitimate. With CF, the onus is to prove the money is legitimate. Giving a years worth of rent is unusual. All this is understandable. Not saying they should structure, just giving maybe a touch of context to why someone would think they would want to. Commented May 14, 2019 at 3:52
  • 4
    It's my understanding that transactions (in the US) over $10K are perfectly legal, but structuring is clearly defined in the law as being illegal. But I am not a lawyer. (Civil asset forfeiture infuriates me, which is why I did some reading on this).
    – donjuedo
    Commented May 14, 2019 at 11:54
  • 20
    RE: "Best would be if your friend writes you a check." I would agree here, and while a little thing and surely not 100% legally binding, if he writes 'Rent for June 2019 to May 2020' in the Memo, that will only support the reason for the transaction. As the others have said, even if audited, this is all for legal purposes, so there is nothing to worry about. Commented May 14, 2019 at 13:53
  • 3
    @GregoryCurrie Civil Forfeiture could come into it certainly, but it could come into literally anything you own, under any conditions, without warning, so it shouldn't really be a concern.
    – David Rice
    Commented May 14, 2019 at 14:35
  • 3
    @DavidRice I think there is a special category of concern with civil forfeiture when dealing with cash. There have been a few cases in the U.S. of people moving with large amounts of cash (>= $10k), for legitimate purposes, being seized in roadside stops because that amount of cash is, itself, supposedly suspicious "enough". But this shouldn't be a cash transaction between the OP and friend anyways, so I agree that it shouldn't be too worrying here.
    – Upper_Case
    Commented May 14, 2019 at 15:51

Do one transaction, and if they ask, explain it: there is nothing wrong with this. Do not split the transaction into multiples to avoid the reporting threshold; that's structuring even if what you're concealing is legal!

You aren't taxed on money you're holding for him.

If he moves out before the full year is up, you must be prepared to refund the unused portion of the money within I believe 15 days. (even if there's a lease, if he follows the procedure to break the lease, you have to give it back).

You are a trustee of this money, meaning you are responsible for it. You CAN invest the money any way you please, and you keep all the gains, but you eat all the losses!! If you lose money on the investment, you have to pay his rent or refund out of your own pocket. No excuses. This thing is called "leveraged investing".

  • 1
    a safe way to collect interest on this money is a treasury note, the gains are small but is is guaranteed to give you the upfront money back at the end of the term, which can be 1 year or less
    – Reed
    Commented May 14, 2019 at 13:40
  • @Reed right that's what I was thinking, since I already have that much money and then some on hand might as well put the excess to work.
    – Asleepace
    Commented May 14, 2019 at 18:16
  • 1
    @Reed but OP needs 1/12th of the money every month. KISS and just put it in the bank.
    – RonJohn
    Commented May 15, 2019 at 5:01

If you're dealing with cash, do it in one deposit. Yes, your bank will generate some paperwork to let the government know about the transaction and that will potentially make the IRS more interested in auditing you down the road. But breaking up a large transaction into smaller transactions in order to avoid the bank generating that paperwork is a felony called structuring that could lead the government to confiscate all the money in the account. If you're making an electronic transfer, this is much less of an issue (though banks always have the option of making a suspicious activity report to the government if they see abnormal activity on an account).

To protect both of you, I'd put together a simple contract outlining what you're doing. State that Friend is giving you $11,000 today to be applied to the monthly rent from Time A to Time B in the amount of X/ month. That gives you documentation should the IRS or someone else inquire about where that money came from so that it's clear that you're not evading taxes.

If you're going to hold the money in an interest bearing account, do you intend to keep the interest or do you intend to pass that along to your friend? Either way, you'd want to specify that in the contract you put together in the previous paragraph. If you intend to keep the interest and pay the taxes, that's easy enough. If you want the interest to go to your friend, that's going to complicate things since the bank is going to generate paperwork for the IRS saying that the interest went to you. Assuming that you're getting something like 1% interest on the money so maybe $50 for the year (since you're spending down the balance every month), it's probably not worth the time and effort to fix the IRS paperwork. You could simply agree to write your friend a check for the interest minus the taxes you paid on that interest at your marginal tax rate. That would be income to your friend that he should technically declare and pay taxes on again (though it's incredibly unlikely that anyone in that situation would actually do so).

Separate from the financial arrangements, though, think carefully about whether this is really a wise thing for you to do. Mixing money and friendships in general is fraught with peril. What happens if 6 months in your friend says he wants some of his money to pay for something like car repairs? Are you going to give it to him, potentially leaving him short of rent at the end of the lease? Are you going to give him a loan from his own money that he has to pay back? Are you going to be responsible for figuring out whether he has relapsed and is really using the money to buy alcohol? Separately from that, if your friend is concerned enough about relapse that he doesn't trust himself to manage his money, do you really want to risk being stuck living with a roommate that has relapsed six months into your lease? If he's at a point where he's worried that he'd blow all his savings, he's probably at a point where he would be a really, really terrible roommate. Are you sure that you want to sign up to deal with that should it happen?

  • 1
    Awesome thanks for in depth answer, yes I think writing a simple contract is great idea and I am definitely aware of the risks involved with this friend, however he is essentially family and I am willing to take a slight risk with helping him out.
    – Asleepace
    Commented May 13, 2019 at 23:05
  • 3
    That's right, get it in writing! Commented May 14, 2019 at 10:32
  • 1
    Absolutely, positively definitely get it in writing!! Make it strict about ONLY being for rent, and that he ONLY gets it back if he moves out. Even put in the contract that you're going to open a separate bank account, mention the name of the bank and promise that you'll show him monthly bank statements, and proof that the money went for the rent. This seems like being over the top, but it's the only way to eliminate ambiguity, doubt and mistrust while retaining the friendship.
    – RonJohn
    Commented May 15, 2019 at 5:07

Transactions over $10,000 are only reported if they are cash. A personal or business check or a bank wire, for instance, originates in the banking system and is not cash. The banking system can provide a check or money order that is equal to cash but those things are only considered cash if they are less than $10,000 ! Then several money orders that add up to $10,000 or more is a transaction that is reported.


A roommate receiving rent in advance is probably an implied contract that could be heard by a civil court. I would put the funds in a high-yield bank savings account.


If he were your child, you would just open an account "in trust for (his name)" with you as signatory. Banks do this all the time and exchange listed companies issue shares all the time (probably bonds too, but there's no reason for individuals to buy corporate bonds). You don't even need to do any paperwork.

But he's not your child. That means to establish a trust in his name, with you as sole trustee, you have to visit a lawyer. When you explain the situation (probably a half hour meeting, but maybe an hour), they'll draw up a standard trust agreement (no bells and whistles, no tax dodges) so you can do this in an ironclad no risk way. Between $500 and $1,000. Is it worth that for one year? Or is it better to just deal in checks and leave a clear audit trail.

The reason for writing contracts is to try to think ahead of time about the issues that might come up and deal with them before hand. How should the money be invested? For maximum profit or for maximum safety? Who shoulders the risk of loss and gets the gains? (Obviously the same person.)

  • Out of all the comments and answers trying to find ways around the problem, I'm surprised this is the only mention of the direct, by the book way to do what the OP is asking for: friend "owns" the account but the OP is the only one who can transact on it. No issues with taxes, who owns interest, etc. Gets my upvote!
    – dwizum
    Commented May 15, 2019 at 13:13

I think the best thing would be for your friend to make a bank account in his own name, to be reported to the IRS as his. Interest earned is also his. He puts all the money in this account.

He then tells the bank that you are allowed to transfer money out of this account on his behalf.

Also in this case you should write up how things are supposed to work. Basically that you are allowed to take money from this account only for the payment of rent. The bank might want a copy, the IRS might want a copy.

This solution is most transparent for audits. It is also cleanest in case something unexpected happens. You should always plan for the unexpected.

  • 5
    This doesn't solve the problem if the friend relapses into drinking and withdraws the money to buy booze with it. Commented May 14, 2019 at 13:45
  • 2
    An absolutely horrible idea, since it completely defeats the purpose of the alcoholic giving him the money upfront.
    – RonJohn
    Commented May 15, 2019 at 5:08

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