I'm not sure if the program does it or not, but I would expect it to.
When you indicate that you are renting below FMV you still enter all of your rental expenses, even if they exceed the rental income. The program (I think) will only deduct the amount of expenses up to the rental income received, and the excess expense is not carried over. It's just lost forever.
My thing is what *exactly* defines Farm Market Rental Value? There is no magic formula that I can find. The best definition I can come up with is this.
FMRV is any value that is between the highest amount the renter is willing to pay, and the lowest amount the landlord is willing to accept. Generally, the rent amount will be on par with other rentals in the given area that are of the same size, condition, and offer the same or equal value amenities.
So take two rental properties that are both 1500 sq ft with 2BR/1BA. One was build in 2018 out of concrete block, the other was built in 1940 out of wood. I would expect the newer house which is of better construction to rent significantly higher than the older house with it's 15 year old appliances and window A/C units in it, instead of central air.
