This property is in Phoenix AZ. I was living in this property from 2016 but due to job, I moved out of this property during the last quarter of 2017. It was my primary residence at that time and now rental property. First tenant was there for two years and then second tenant started from Q4 2019. I was extremely busy due to between the jobs and couldn't travel to Phoenix AZ and just took help from my friend to get it rented. It was 3.5 years of lease and I charged the market rent around $100 as it was a long term rental. But after COVID-19, property market in Phoenix AZ went quite up and so the rent. First 1.5 years rent was $1725 and then it became $1750. Lease ends in Mar 2023. House has solar panels also so very low electricity bill and landscaping, HOA and property taxes I take care of. Rental property had top home warranty and there is not even a single issue which is not fixed - house is in a very good condition. But now the rent of this house should be at least $2400 or $2500 as per the local market news, zillow and realtors and i am getting only $1750.
Every year when i file the taxes, it's $11K kind of depreciation of this property. For 2021, when i am filing the returns, using turbo tax home and business, desktop edition(Windows)-it popped me a question - Am I charging below market rent? I answered yes then it stated that I can follow this path and it will be considered personal use of the property as the tenant are not at all related to me or friends? What does all this means? Can i do that? What will happen if i sell this property in 2022 or 2023-is there any impact? I lived for around 14 months in this property during 2016 and 2017 and rest of the time it's on rent. What are the consequences of marking this rental property below market rent and then sell it in 2022 or 2023? If I choose the path of charging less rental than the market value, will that term be considered as personal use of the property and what are the consequences of that? Will that be considered 14 months(2016 and 2017) + remaining 15 months as personal use of the property? Please let me know.
