HOH living on farm

[Gretel]

Client (employee) lives on farm with his two children. Housing provided, food is paid by taxpayer. I am thinking the value of the residence figures into the HOH equation but don't think it even comes close to the expenses for food. Never had that before so any inside is appreciated.

[Koss]

Value of Residence

Okay, let me make sure I understand the question, 'cause this one sounds like fun...

An employee of the farm lives in a residence on the farm, but doesn't pay rent. This is how I am interpreting the phrase "housing provided."

The question appears to be whether, and how, this particular fact affects the determination of whether the employee can use HOH filing status, i.e., did the taxpayer pay more than half the cost of keeping up the home?

My question is: Is the FMV of the housing somehow included in the employee's taxable compensation?

If so, how? If not, why not?

BMK

[ATSMAN]

Never had the HOH question asked but I have 2 farmers that have one or two "farm hands" live on the farm because they provide "security" to the farmer, especially with the farm equipment and keeping trespassers out. It is for the employers convenience so not included as taxable benefit in the W2.

[Gretel]

Okay, let me make sure I understand the question, 'cause this one sounds like fun...

An employee of the farm lives in a residence on the farm, but doesn't pay rent. This is how I am interpreting the phrase "housing provided."

The question appears to be whether, and how, this particular fact affects the determination of whether the employee can use HOH filing status, i.e., did the taxpayer pay more than half the cost of keeping up the home?

My question is: Is the FMV of the housing somehow included in the employee's taxable compensation?

If so, how? If not, why not?

BMK

Koss, no this housing benefit is not included and none of the farm hands I am doing tax returns for pay rent or have this benefit included in the W-2. I actually never questioned this, which might not have been the right thing to do. But if they tell me there were out at 3am for calving I assume the whole set up is mainly for the convenience of the employer. This specific clients says he has one day a month of and earns under 25k. I guess being available for extended hours is all part of the deal getting free housing.

[Burke]

Income-tax-free housing allowances are allowed for ministers, and military personnel, in certain circumstances. I never heard of them being a tax benefit for farm hands. I could be wrong.

[jmcdtax]

26 U.S. Code § 119 - Meals or lodging furnished for the convenience of the employer

26 U.S. Code § 119 - Meals or lodging furnished for t
he convenience of the employer
IRS Rulings

(a) Meals and lodging furnished to employee, his spouse, and his dependents, pursuant to employment
There shall be excluded from gross income of an employee the value of any meals or lodging furnished to him, his spouse, or any of his dependents by or on behalf of his employer for the convenience of the employer, but only if—

(1) in the case of meals, the meals are furnished on the business premises of the employer, or

(2) in the case of lodging, the employee is required to accept such lodging on the business premises of his employer as a condition of his employment.

[Burke]

So, if he meets (2), it would not be taxable income to him. Then you have to determine what the cost of keeping up the home is, to determine if he pays more than one-half, right? This would not be its FMV, but what the actual expenses were, IMO.

[Gretel]

Maybe. Here are my thoughts on FMV rent and actual expenses. The accomodations at the farms might not be something that they could rent to an outside person, which makes is very hard to come up with FMV. Since they do not have the need to know the expenses for this residence (electric, water - probably own well, maybe gas) separately how in the world would anyone want to come up with a reasonable figure. On a farm you use electricity for so many different things, it not like you have a certain number of people living there and just could somehow prorate. Any good idea to deal with this issue is appreciated.

[jmcdtax]

Rental value for housing

What do comparable homes rent for in the area? Use that to calculate rental value. Is their a separate electric meter for the home? Is there a separate gas meter or propane tank for the home? If there are separate meters or tank, it should be simple to determine the cost if the farmer pays those charges separately and he/she is willing to provide the information. Or, you might have to estimate those costs for comparable size home/family. Sometimes in our area the house is rent free but the utilities are paid for by the farm worker. Utility companies may be able to tell you the charges or provide monthly estimates.

[Burke]

Maybe. Here are my thoughts on FMV rent and actual expenses. The accomodations at the farms might not be something that they could rent to an outside person, which makes is very hard to come up with FMV. Since they do not have the need to know the expenses for this residence (electric, water - probably own well, maybe gas) separately how in the world would anyone want to come up with a reasonable figure. On a farm you use electricity for so many different things, it not like you have a certain number of people living there and just could somehow prorate. Any good idea to deal with this issue is appreciated.

Pub 17 has a worksheet to determine the costs of keeping up a home to qualify for HOH. See Filing Status. It specifically says "do not use the FMR value of a home you own." (It says nothing about FMR value of a home you are provided.) However, one of the things on that worksheet is Rent you pay. His would be zero. The other column is the actual total cost of items such as mtge int, prop taxes, utilities, etc. His major expense would be food. But it looks like you would have to determine what the other actual costs are from the owner to do the worksheet.