If the payments are in fact rent, then you are required to report the rental income, however since it is below fair rental value (FRV) the expenses are limited to the amount of income and cannot create a loss that offsets other taxable income. The following publication can be helpful to consider your specific situation. Search for 'fair rental price'
The eligibility requirements to utilize the Renter's Credit on the California (CA) return can be found at the link below. This may help you to determine if they are even eligible.
- CA Nonrefundable Renter's Credit
- The CA Renter's Credit is a nonrefundable credit worth sixty dollars (or a hundred and twenty dollars if you're married, filing jointly or a widow/widower or RDP) that can be applied to your CA income tax if you've lived in a rental property for more than half the year.
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