Where do I enter "Below FMV" rental income?
This discussion has been locked. No new contributions can be made. You may start a new discussion here
You try real hard to find a reason it's fair rent.
Otherwise, it's just "other income," and the interest and property taxes (both subject to limitations) go on Schedule A. When miscellaneous itemized deductions in excess of 2% AGI come back (is it in 2025?), the rest of the deductions go there.
It's their son.
Renting at below fair market, is considered personal use. If a taxpayer has any personal use of a dwelling that they rent, they must divide their expenses between rental use and personal use. They must divide expenses even if the dwelling doesn’t meet the definition of a residence. They may deduct only rental expenses on Schedule E (Form 1040). They may be able to deduct some of their personal expenses on Schedule A (Form 1040) if they itemize deductions.
Here is link for irs information:
https://www.irs.gov/newsroom/know-the-tax-facts-about-renting-out-residential-property
I was going to argue with Lisa about this but then I decided she's closer to the truth than I was. The issue isn't whether the rent is below market, but whether there is profit motive. I have a client who is renting a house to a family member at lower than market rates. They were going to sell it a couple years ago, but decided that even vacant real estate was a better investment than Bitcoin or GameStop. Since then, the property value has increased by at least 50%. They don't want to deal with a stranger as a tenant, and the tenant/relative is a potential commission-free buyer. There is no mortgage, so they still show a profit on Schedule E.
Is it possible to have the other side of the coin -- fair rental value, but no profit motive? Suppose someone knows they can make 20% in the market but choose to rent to a kid with a good job but no credit and recently released from prison, even though the return is only 5% and real estate prices are declining. The case could be made that this shouldn't be on Schedule E, but it's unlikely that IRS will be making it anytime soon.
You have clicked a link to a site outside of the Intuit Accountants Community. By clicking "Continue", you will leave the community and be taken to that site instead.