<prompt> Human: So... I think I screwed up. I rented my house to my sister after her divorce, and I moved into an apartment. TurboTax is now telling me that I owe taxes on the entire amount that she paid me to cover the cost of that property. I was under the impression that any income I gained would be offset by the costs, but now it says I owe an additional 3,000 in income tax. Am I doing something wrong? Other than making bad decisions in general...EDIT: Thank you all for the responses. Quick update, we did charge her close to fair market so we arent as screwed as I thought. Sill a huge chunk that we owe, but with my wifes W-2 withholdings we are at least in the black. Thank you for all your help!  <response>: How much did she pay you in rent? What were your expenses relating to the house? You can offset the expenses against the income. 3000 in tax equals 12,000 in income at a 25 tax rate, so unless she paid you a lot more in rent than that, its likely you can reduce, or maybe eliminate, the tax due by putting your house expenses property tax, mortgage interest, etc. into TurboTax. 