First, check to see if similar properties in your area are rented at or near the rents that you are charging. If so you should select that you are renting at fair rental value all year.
The IRS has no blanket ruling on below-market rentals to others-- aged tenants and others on fixed incomes, for example, who may need some assistance as fair market values rise.
Questions to consider would be whether you had difficulty renting it, leaving it empty which would cause concern for burglary or theft. Consider all the facts and circumstances of your situation. One main question is whether you are renting for profit. If so, you should proceed to enter your rental indicating that it was rented at fair rental value.
If you decide that you are not renting for profit, you can enter the rental income under Other Reportable Income.
- In the search box type other
reportable income > Jump to other reportable income
- Click "No" then Select Other
reportable income,
then follow the prompts to enter the income.
The expenses for property tax and mortgage interest can be deducted on
itemized deductions (Schedule A) even if other expenses are not
allowed.
If there is any
income from rents after subtracting the mortgage interest and taxes you
can take the remainder as a miscellaneous expense subject to 2% of adjusted
gross income also on the Schedule A.
