https://www.irs.gov/pub/irs-pdf/p527.pdf
page 16:
Not Rented for Profit
If you don’t rent your property to make a profit, you can’t deduct rental expenses in excess of
the amount of your rental income. You can’t deduct a loss or carry forward to the next year any
rental expenses that are more than your rental income for the year.
Where to report. Report your not-for-profit rental income on Schedule 1 (Form 1040),
line 8i. If you itemize your deductions, include your mortgage interest and mortgage insurance
premiums (if you use the property as your main home or second home), real estate taxes, and
casualty losses from your not-for-profit rental activity when figuring the amount you can deduct on Schedule A.
@Mike9241 @AmeliesUncle - sorry but I am not tracking how the reference cited in the prior thread leads to the conclusion that the below market rental income is not taxable income. In this case, the sister is renting the unit for 365 days, which is certainly more than 15 days. Where does the link or Publication 527 specifically state that below market rent are defined as personal use days? I don't see that.
let's say I am quite wealthy and own a luxury 2md home that rents for $50,000 per month, but I rent it for $40,000 per month to my brother which is below market. That $480,000 of income isn't taxable income to me but I can continue to deduct my mortgage interest? My brother doesn't have to report a gift since it exceeds $16,000?
The way I read Pub 527, I need to report the $480,000 as other income and I can take my deductible expenses on Schedule A. If it turns out I am making a profit over a number of years, , different rules apply but let's not go there.
thanks
