Does anyone have experience in a rental agreement. My mom lives with me. My elder attorney suggested instead of a caregiver's agreement, since they are complex, that I consider a rental agreement. He advised me that I would need to have a realtor come into my house and access the space she is using. He then sent me a letter with his qualifications and what he thought would be a fair market rent. For a bedroom, a tv room, use of the rest of the house and front porch plus utilities includded he assessed it at $875. The neighborhood is desirable. So the realtor gave me a rental agreement to complete, mom signed and every month $875 is taken out of mom's checking account and automatically deposited into a separate account in my name. That's all that is in that account. He didn't say if I needed to get it notorized. He also advised me to call an accountant to see if I need to pay taxes on it. I have not done that yet. Does anyone have any experience with Medicaid and using a rental agreement?

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Good news evander. I am glad that you went to a tax specialist for clarification.
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Reply to Isthisrealyreal

Just wanted to let everyone know that I have talked to a CPA and He confirmed that I would need to list the rent payments as income to me. Schedule E
Also I talked to an eligibility specialist in the South Carolina Medicaid dept and she confirmed that a rental agreement between mom and me was acceptable. It does not have to be notoriz ed and I would need a letter from a realtor as to what the fair market rent would be...which I have. Rental agreement is much simpler to do than a caregivers agreement ...which is also acceptable.
Thanks for everyone's help.
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Reply to evander09

House sharing "income" less expenses goes on a Schedule E. My Grandparents lived with me for a couple of years. They paid a rent that included food and laundry. Medicare paid for personal care and cleaning their room and bath. Because they had access to the entire property when calculating their % of use 50% was used. Until the rent your father pays( less any services you provide) covers more than 1/2 the total expenses on the house including depreciation, your Schedule E will not show a profit or tax owed. I have been a landlord for 35 years with all kinds of rental situations.
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Reply to bowgirl

Thanks for posting what sounds a reasonable accommodation for your mom. The figure of 875 sounds workable and I hope all goes well re taxes and so forth. I'm wondering if Spouse and I could come to such an agreement because he's not on the deed or if a spouse could figure into this situation, rather than a parent. If it turns out the income needs reporting, E is the 1040 schedule that I report rental income on.
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Reply to pronker

The money is "pay" you are receiving. You should talk to a tax expert about how to list it on your taxes.
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Reply to Taarna
Isthisrealyreal Jan 28, 2020
It is not pay it is income and has different tax liabilities.

This needs to be addressed by her tax professional because all of her income and plays a huge role in the answer.
evander09, after thoroughly investigating my state's Medicaid rules, I found that rental contracts didn't have to be notarized, but personal care-giver contracts did. I drew up a rental agreement for my dad based on fair market value, similar to yours, with the idea that if he ever needed Medicaid assistance, then the rent I collected from him (less any income taxes) would be available to supplement his future care in a facility (e.g. nicer, private room w. bath, etc.). This plan would have eliminated the possibility that I would need to beg my siblings to help pay for those extras. While I didn't actually collect rent from him, the total rent not paid was listed as a debt he owed me in my annual conservator's reports filed with the court. As it turned out, I didn't need to collect the rental debt before my dad died, so I didn't have to test this plan, but I'm still pretty sure it would have worked.

     I think depositing your mom's rent into a separate account is a good idea and leaving it there would also be good, at least until you've figured out any income taxes that might be due and assurance that your state's Medicaid office will accept it as your mom's legitimate expense (i.e. not a gift to you). You should probably take the rental contract to your local Medicaid office to get that assurance ASAP.  FYI, collecting rent will likely prevent you from being able to claim your mom as a dependent on your income taxes, but that's probably easily a worthwhile trade-off since the tax law changes that took effect for 2018 cut the tax benefit of caring for parents by about 2/3rds of what it was previously.

Kudos to you for taking care of your mom and best wishes for the journey ahead.
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Reply to bicycler

If you sign a rental agreement, you have to report the rental income on your tax return (but you do get expenses, including depreciation).  If you have a roommate agreement, based on share of house, not FMV, it is not taxable income.  In either case, it should be signed and notarized.
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Reply to FloridaDD

If you don’t declare it as income then it is gifting in the eyes of Medicaid.
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