<prompt> Human: So I will be moving into a new house soon, and to help with costs, I will have three roommates. Each of my roommates will give me 400 a month for rent. Thats an extra 1200 a month.Do I need to report that as income to the tax bureau? If I did not, could I get in trouble for tax evasion?  <response>: I should write a sticky on this.Strictly - and legally speaking - youre supposed to put income from roommates in a dwelling you own or are the primary leaseholder on a Schedule E. From that you need to calculate your cost basis and deductions.So, 3 roommates means that they probably have use of about 75 of the house there are different ways of calculating this - you just have to be able to defend whatever one you chose to the IRS if they ask. Square footage, value of room, whatever, so 75 of the interest portion of your mortgage payment is deductible, as is 75 of the insurance and 75 of the tax. If you pay utilities, 75 of those payments are deductible.I mention the strictly speaking above because there are tons of ad-hoc arrangements like this and that the IRS doesnt usually care. Why? Well, lets look at some math.Lets say you have a 1500-a-month mortgage, which on average over the course of the year is about 900 interest300 principal reduction 300 taxinsuranceescrow. You pay for utilities, including Internetgaselectricwatersewer that run an average of 200month. Finally, because nobody can ever get 3 roommates to stick around forever, you have a vacancy rate of about 6-8 - well say that the rooms are occupied for 34 of 36 man-months.Lets crunch them numbers! 34 x 400 is 13,600. Looks like a lot. Lets do some deductions..75 X 900300200 X 12 is our deductible costs. That yields...12,600 in deductible expenses.Subtract 12,600 from 13,600 and you have 1,000 net income. Thats what youd have to pay taxes on. If this were an actual investment property, you could now deduct depreciation which is 128.5th of the propertys cost basis and you could 0 that out. Or you could pay the tax man - if youre in the 28 bracket - an additional 280 in income tax. It costs the IRS about half that even to do a very simple document request and verification.Much like use tax, this simply isnt something the IRS has much reason to pursue because the numbers are so low, and because you could probably find a way more things to deduct to zero it out.So, in short: If youre a compulsive adherent to the law, pay use tax on your Amazon purchases, etc., just run the Schedule E every year. I dont encourage people to break the law, but you dont have much to fear if you dont fill out the Sch. E on a property like this. 