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I work as a farm laborer in exchange for lot rent for my own Recreational Vehicle, electricity, and water on a friend's farm. There is no cash exchange. I am the one and only "lot renter". Will either "landlord" or I owe taxes or have income to report? If so, what form do we need to use for filing? Can I use this as income to receive an Earned Income Tax Credit? Again, no money is exchanged unless I work more than the agreed hours or out of the ordinary work (total for the year $50.00).

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    Not sure about the specifics in the US, but in most countries, this would be benefit in kind, and would be subject to taxes and relevant social security. – jcaron Jan 29 '16 at 12:30
  • wgich amount is "total for the year $50.00" referring to? – Michael Sep 29 at 0:46
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Ethically, you and your landlord should always report both income and expense as there technically exists a service and a rent. So it is subject to taxation.

On the other hand, it can be considered an exchange of a simple favour and if it doesn't involve a money exchange or any profits (I am assuming that you are not selling what you or your landlord produce on the market) no value can be calculated thus no taxation can be applied. This changes though if a contract is involved, as a legal value can be estimated.

Caution: These subjects can vary on an extreme level of specificity, of what can and cannot be claimed as income and expense, which can vary per country, state, province and even per judge, as well as the nature and sector of the work. Also, if you intend to formalize this relationship, the type of contract and reporting forms do vary per state as well. So it might be best to confirm it with a local legal advisor to avoid unfortunate surprises.

  • Exchanging labor for something of value is NOT just doing a favor. It is taxable income. It doesn't matter if it's difficult to assign a value to the pay, it still needs to be done. – stannius Feb 4 '16 at 18:48
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    I know. The question is does it have a assignable value. If you can't, it is not possible to see it as taxable income until it does. I said it because I know of a somewhat similar case where it wasn't accepted by the IRS because they couldn't assign value to it. – CMPSoares Feb 4 '16 at 18:54
  • doing taxes is not a question of ethics – unperson325680 Jun 25 at 9:14
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Let's assume you ask for payment in cash, which you then pay right back for lot rent. This neatly bypasses such issues as trying to put a price on lot rent, and can set your income to the most advantageous point for the purposes for EITC. However, unless you have children, this is only going to be at most ~$500/year. More importantly, this would increase the income (and therefore taxes) of your friend, probably by more than $500.

Or to put it another way, the "tax rate" of the EITC for a single person is only like -3%. If you have a kid, it's more like -30%. If you have a kid, it could be worth it to have on-paper income, and just pay your friend a bit extra for the extra tax burden. If you don't have a kid, it's unlikely to work out.

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    Whatever the farm owner pays is surely deductible as a farm expense. Doing it "properly" will avoid the problem where the farm owner has to report imputed income for rental of the RV (at fair market value), and has no labor expense to cancel it. – Ben Voigt May 26 at 1:54

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