Adult Children Moving Back Home? Here's What to Do

“Boomerang kids”¹, or adult children moving back home after college, have become rather familiar in U.S. households. In fact, recent numbers put millennials and Gen-Zers living at their parent’s houses nearly parallel with counts in the 1940s, a phenomenon that PEW research center² dubbed as a “return to the past.”

Many adult children were forced home after college because of crushing student debt, even after securing work. But the massive spike in re-cohabitation over the last few months has been perpetuated by an unfamiliar catalyst. In the age of COVID-19, a stalled economy and subsequent mass unemployment³ has funneled even more adult children back into their parent’s or grandparent’s homes — around 3 million more⁴— and counting. Some are holing up in their childhood bedrooms for free. Many are thankful to be paying a fraction of their previous rent while they wait for certain sectors of the economy to reawaken.

This surge of adults flocking home has brought back an age-old issue that, for some, never really left the building: letting adult children live with you. While a number of parents have no problem allowing temporary stays with a trade-off of expectations, it can be hard for a lot of parents and grandparents to not only assume the title of landlord, but also to enforce their house rules and requirements.

While the pandemic is certainly an extenuating circumstance for the millions of adult children out of work, it’s worth revisiting how to let family members move back into your home while keeping relations peaceful — and respectful.

Be Clear About Rules

An extra body in the house means your day-to-day will change, but because it’s your house, it’s also your rules. You can communicate these rules verbally, but you can make it official by going the extra mile and drawing up a family lease agreement. Before doing either of these, here are some questions to ask yourself:

What’s the longest you are willing to let your family member stay?
Will you allow your family member to bring their guests into your home?
Do you wish to have certain quiet hours?
What sort of activities are permitted — and not permitted — in your home?
Are you charging rent or utilities?
Is there housework that you’d ask your family member to perform?

Charge Rent or Create a Trade-Off

There are certainly some exceptions here, but if your adult children or relatives are taking up a room in your home, it’s customary to charge rent — especially after they’ve completed college. If your adult child has the means to pay rent — even if it’s a small amount — charging them isn’t about demonstrating that you’re not a pushover. Instead, it creates boundaries of respect and helps better prepare them for when they’re ready to fly the coop (again). Even if the amount is simply to cover the jump in utility costs, the general consensus is to charge something.

If your adult child is suffering a hardship that is leaving them penniless, create a trade agreement where they take on housework and additional duties that will offset your costs of allowing them to stay.

Know the Laws

If your adult child or relative is staying in a room in your home, you won’t need to be wary of the taxman⁵ — unless you gift them a substantial amount of money or a car (you may need to fill out a Form 709 at tax time). It may also be beneficial to weigh whether or not you can claim your adult child as a dependent (see potential tax benefits here).

But know this: if you’re allowing adult children or other relatives to hang their hat in a property that you use as a rental for an extended period of time, you must charge fair market rent or the property will be classified as personal use⁶ — which means you’ll have to claim the money you make as income, but you’ll lose your valuable rental property tax deductions. Read more about renting to relatives here.