[msfantastic]

I asked if the payment received for hosting a foreign student is a taxable income. I got a reply that it is a tax-free transaction since the payment is a reimbursement of costs. If the payment is more than the actual cost, is it still a non-taxable transaction?

[AtlantaTaxExpert]

Yes, it remains non-taxable, because you are probably not factoring in such items as wear-and-tear on your house, additional utility costs, etc.

[The Texas Tax Expert]

I don't think I agree with ATE. If it were a direct reimbursement I might agree. However, there is a charitable contribution deduction allowed for hosting foreign exchange students but it is limited and you cannot deduct the excess as business. Therefore, I would conclude that anything that is not a direct reimbursement for an out of pocket expense is income.

[AtlantaTaxExpert]

TTE:

You may have a point. It would have been nice if we knew HOW MUCH in excess of actual costs the reimbursement was, so we could address it as a practical matter versus theoretical concerns.

By this I mean the practical concern of a small overage. If the excess is less than $100, the IRS would not care one way or another due to the de minimus rule.

[AtlantaTaxExpert]

That kind of hosting would DEFINITELY be taxable income. Not to report it as such is TAX FRAUD, pure and simple.

[AtlantaTaxExpert]

Actually, I would not! Someone who did something similar tried to get me to prepare their returns and NOT report the income.

I walked away!