My sister is on social security and unable to afford her previous mortgage payments therefore I am not making any profit on this house but it is allowing her to stay in her home
This sounds more like you are only charging her for the cost of the utilities each month. So I'd recommend several things.
- Treat it as a 2nd home and be done with it. All you can claim on this home is the property taxes on the SCH A and that's it since there is no mortgage.
- have her put the utilities in her name. She can do that with no problem even if she doesn't own the home. The utility providers could care less who the send the bill to, so long as it gets paid.
Doing the above would then negate you having to collect "any" money from her and therefore doesn't have the slightest possibility of putting you an an ackward possition with the IRS if (lord forbid) you should ever get audited.
