How to Split Expenses with Roommates | Splitting Bills | Roost
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How to split expenses with roommates

So… you could pay $1900 in rent by yourself… or you could have nearly a grand per month to use towards partying like a rock star. Your choice. Living with a roommate(s) is a great way to save money. Imagine paying only half or a third of housing expenses such as rent, internet, heat, electricity, and streaming subscriptions. You may even be able to save more money by sharing food and household expenses. If you are living with roommates, you may be wondering how to split expenses with roommates fairly.

Splitting rent with a roommate

When splitting rent with a roommate or two, there are several ways to divide the rent fairly. When you decide how much rent will be paid by each roommate, put the agreement in writing. Also, decide how the rent will be paid, such as by using an app or by bank transfer. 

Here are a few common ways to split the rent

1. Every roommate pays the same

Simply divide the amount of rent by the number of roommates and everyone pays that amount. This is the easiest way to portion the rent, but it does not account for room size or other accommodations.

2. Roommates pay by space allotted

It is obvious to most that if a roommate gets the master bedroom with a bathroom and perhaps even a balcony, that they ought to pay more than those with just a room. Using the square foot method (based on $1900 rent for a 1200 sq ft apartment), the roommate in the smaller 144 sq ft bedroom may pay $745 per month while the roommate with the much larger master bedroom plus bath pays $1155 per month. In this example, the mutual space is split evenly. However, let’s say one of the rooms has a private bath or balcony. We typically see a 10-25% premium added for the benefits. Edge a bit higher on the percentage premium, in addition to the square feet, if it’s a significant benefit — e.g. private floor, balcony and bath. Lower if it’s arguably less of a benefit — e.g., small side balcony.

3. Pay by income

While not common among roommates, some people who chose to live together, such as committed partners or family members, may portion the rent based on incomes. For example, if one partner makes twice as much money as the other, they may be responsible for paying two-thirds of the rent while the other pays the remaining third.

Again, whatever you decide, record that agreement in writing as part of your roommate agreement. 

What is the best way to pay shared living expenses?

When it comes to renting, most roommates will pay the landlord on their own from their accounts. However, other shared expenses, such as utilities or subscriptions, may be in only one person’s name. In this case, one person may pay the bills, and the other roommates will need to pay the responsible roommate their portion of the bill directly.

While cash is king, cash doesn’t leave a record. You can pay your roommate cash for shared expenses, but what if they forget you paid them or misplaced the money? Even if your roommate is a friend or relative, it is best to pay in a traceable way.

Best ways to pay a roommate include,

Roost Tip! Some services charge a fee to transfer funds to your bank account. If you are the roommate responsible for the bills, have your roommate(s) pay you for shared expenses via the chosen app. Instead of transferring the money, keep the money in the app, and use that money to pay your next month’s rent. This practice requires a bit of discipline since you need to be able to be a month ahead of the bills, but it will avoid you having to pay the transfer fee.

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How to split grocery bills with roommates

Splitting the grocery bill is difficult because most people have different appetites and food preferences. Sometimes one roommate may like to entertain others often, or one roommate may live off of take-out alone. This makes splitting the grocery bills challenging.

Evenly sharing the grocery expenses doesn’t work out well in most roommate arrangements. Imagine trying to keep track of how much milk you drank or whether you made a sandwich for a friend. Many find it easier to keep food labeled and separate. Some roommates even choose to put a mini-fridge in their room to keep their housemates from drinking their favorite beverages. It may be easier if you and your roommates just share the cost of consumable goods.

Consumable goods include cleaning supplies, toilet paper, paper towels, garbage bags or hand soap. To share these expenses, you can shop once per month and split the bill. Or, you can all share receipts at the end of the month and settle it then.  For example, using the shared-receipt method, if a roommate buys a 12-pack of toilet paper, they would save that receipt or put it in a shared expense envelope. All the receipts would then be added up and divided at an agreed upon interval, such as every other Friday (payday).

Some roommates choose to pay shared expenses using an expense sharing app such as Splitwise or  Settle Up.

Splitting utility bills with roommates

Fairly splitting utility bills is usually straightforward. Most roommates split the bills equally. However, some divide the bill by consumption. For example, perhaps one roommate runs their window AC 24/7, or a housemate has their children visiting often. These roommates may use more utilities than the others.

If you all agree that you consume differently, you may choose to divide the bill by percent of the bill rather than equally. Some roommates may choose to make short-term adjustments, like if one roommate travels abroad for a month or two and doesn’t consume any utilities during the duration. Roommates may agree not to charge the roommate for those months.

Split utilities often include electricity, gas, and the internet. However you decide to split your utilities, make sure to include it in your roommate agreement.

Splitting security deposits

There are a few ways you and your roommate can split the security deposit. You can simply pay half each. You can pay by percent. For example, if one roommate pays two-thirds of the rent, they can pay two-thirds of the deposit. If you paid the original deposit, you might ask your new roommate to pay a deposit to you. In that case, you are also responsible for returning part of that deposit when they move out following your roommate agreement.

How to share renters insurance premiums

Most roommates decide to pay this bill equally. Renters insurance for an apartment is often less than $20 per month to cover all of the roommate’s possessions. However, each roommate needs to be named on the insurance to receive benefits. 

If one roommate needs extra coverage for expensive items such as music gear or sports equipment, they may need additional coverage at an extra expense. In this case, you may agree for that roommate to pay the additional amount.

Most landlords require tenants to maintain adequate renters insurance, usually at least $100,000 in liability coverage. But don’t worry, this amount is included in most basic plans. 

Can you imagine your apartment flooding and then finding out the premium wasn’t paid or paid late? To avoid gaps in coverage, it is best to pay the premiums using automatic payments. While this puts a slight burden on one roommate, it is worth it. 

Not sure what this type of insurance is, see What is renters insurance?

Do I need to claim what my roommate pays as taxable income?

In most cases, no. Living with a roommate and sharing expenses is no different than splitting a pizza or an Uber ride. However, if you own the home and are receiving rent from another person, you may have to claim it as taxable income (especially if the rent payment results in a profit). As with most business tax issues, you should consult your accountant.

Learning how to fairly split bills with your roommate(s) is not difficult and it is critical to everyone getting along. If changes occur, such as you notice that one roommate consumes more than the others, you can make adjustments. Just be sure to update your rental agreement. Now, if you can just get their cat to stop peeing on the carpet.

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Last Updated: April 19th, 2021