Suppose my apartment complex suddenly gave me a month of rent-free dwelling (let’s say, errr, I won some “win-free-rent” raffle drawing,) what kind of taxable income would that be? It wouldn’t be income so much as it would be a spared/reduced expense.
It’s going to depend on the tax laws of the jurisdiction in which the dwellling in question is located. In most countries, providing someone with the free use of property for a period is analysed as a type of gift, and the transaction will therefore attract whatever tax treatment is accorded to gifts in that country.
Assuming this raffle is held in the USA, the IRS considers raffles as a lottery so the one month free rent would be treated as “other income”.
What country treats raffle prizes as a gift? Considering you need to pay to enter a raffle I can’t see any jurisdiction consider it a gift…
Good point. I overlooked the fact that the OP specified a (presumably paid-for) raffle.
In that case it’s going to be taxed in the same way that the jurisdiction in question taxes gambling winnings (which may well be not taxing them, or it may be taxing them as ordinary income, or it may be somthing else). The fact that the prize is experienced by the winner as an reduction in outgoings rather than as income is irrelevant; gambling payouts are often in non-cash forms, and are taxed on the basis of what the payout is worth or what it cost the giver, which in the case of a month’s free rent is not difficult to calculate.
If in the US net gambling winnings are considered as normal income.
I dunno. Let’s say Bob’s lease ends, and he’ll have a new apt. available in a month but he has to sleep in his car or rent a motel or crash with friends for the four weeks meantime.
Maybe he does each of those for a week or so after putting his shit in a storage unit. The weather is nice at first, so he sleeps in Walmart parking lots until a cold front blows through and he says “Fuck it!” and rents a single room at Motel 6 for a few nights until his money runs out and he goes to a buddy who lets him sleep on the couch for the weekend while his wife is out of town (“but you gotta be gone before she’s back, man, I mean it!”) so the day she’s supposed to fly back he bugs out to Motel 6 again, at which point his apartment is finally ready and he moves in.
What the HELL is the “worth” of all that together? Is sleeping in his car equivalent in monetary terms with couch surfing? What if the couch is lumpy and the Wifi sucks, are you taxed at the same rate as the time staying with the rich buddy who has a brand new West Elm fancy pullout sofa and top of the line gaming consoles?
I’ve never heard of that being given a concrete dollar worth & can’t imagine how byzantine an audit would get. Imagine if the two apartments lease for a different amount each month - which one do you consider for the in between days?
You’re looking at this the wrong way round. The prize is a month’s free accomodation in this apartment. How much would this apartment fetch per month in an arm’s length lease between a willing landlord and a willing tenant? That’s the value of the prize.
I think it depends on the circumstances.
I agree that if it was ‘win a free month’s rent in a lottery’, that’s a prize; treated by the IRS as regular income and by the state however they treat lottery or gambling winnings (if the lottery cost money to enter, I think you can deduct the cost of the ticket).
On the other hand, if it’s a “After two years of on-time rent payments, earn a free month’s rent” offer by the landlord, I’d argue that’s just a price discount, and not income at all.
And finally, if it’s “My benefactor is paying my rent this month (in return for nothing)” that’s a gift, and federally the recipient owes no taxes, while the benefactor might, depending on how much they’ve given the recipient.
In the US. The raffle part could conceivably complicate it, but in general an offer of a period of free rent is a rebate, like a credit card rebate, or a buy one get one free coupon, a discount that’s not taxable income. In the most common case, a lease is offered nominally for 12monthly rent per year, but they make it 11 to get the person to sign the lease: the one month discount is not income.
For an individual that is, because you aren’t allowed to deduct that rental expense from income for tax purposes to begin with. If a company is paying rent for an employee that’s a deductible expense for the company (and may be income for the employee depending). Then if the landlord gives a free month that reduces the company’s deductible expense and therefore effectively adds the same amount to its taxable income (again might also reduce the reported income of the employee due to free rent, in cases where that’s taxable to the employee).
Which is what makes it weird when I see people who send us paper work when get refunds in lawsuits against various companies when there’s no way in the world that they would have deducted the expense to buy them in the first place. It always says to contact your tax advisor, which is what they do, but unless it was a security (stock/bond), it’s never actually income.
I would expect that a “raffle for a free month’s rent” would not require purchase of a ticket, but would be based on prior tenancy and good behavior. Like, everyone who’s paid their rent on time for the past two years gets entered automatically, or everyone gets one entry per year of tenancy, or the like. This wouldn’t be the same as a lottery that the tenant chooses to enter, because they’re entered automatically for doing something they would have done anyway, but it also isn’t like Quercus’ example of “One month free after two years”, because not everyone’s getting it.