Is Room & Board Taxable Income?

If you're getting room and board as part of your job, you might have to pay tax on the value of your food and lodging. The Internal Revenue Service has guidelines for determining when room and board is taxable income and when it's just a tax-free perk. The value of room and board can also be a tax problem for college students.

Room and Board

If your employer provides you and your family with meals and lodging, it's taxable income unless it meets the IRS exceptions. Meals aren't taxable if your employer provides them on her property, for her convenience rather than yours. There's no tax on lodging if your home is on her property; you live there for her convenience; and living there is a job requirement. There's also no tax on inconsequential benefits such as a Christmas turkey or a discount at the company cafeteria.

Faculty Lodging

If you work for an educational institution that provides you with lodging, you may not have to pay tax, even if the lodging doesn't pass the normal IRS test. Your rooms are still tax-free if you pay annual rent equal to the average of non-student, non-employee renters, or 5 percent of the property's appraised value, whichever is less. If you live in a rental house worth $150,000, for instance, the 5 percent cut off point would be $7,500.

Value

If your room and board are taxable income, you have to determine how much money they represent. It's simple if your employer pays the rent on an apartment he doesn't own: Just add the total rent he pays each year to your other taxable income. If you live in employer-owned housing, your income is the fair market value -- what comparable apartments or homes rent for in your community. Apply the same standard to the meals.

Students

Scholarships aren't normally taxable. If students spend part of the money on room and board, however, rather than tuition or other expenses, that money becomes taxable income. The scholarship is also taxable if your school is not "an educational institution that maintains a regular faculty and curriculum " and has students attending a bricks-and-mortar location. As there's no withholding taken out of scholarships, the IRS may require the student to make estimated tax payments throughout the year.

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