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?

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.

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.

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.

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

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!