Brother lives in my house but pays for all expenses including mortgage, how do I fill out schedule E?

[Realstate]

Hello,

I took out a rental property loan in order to buy a house for my brother since he didn't have his credit well established yet, he is currently paying for all the expenses including direct payments to the mortgage lender. In a couple of years we would like to transfer the mortgage to his name. 

Until then, how do I fill out Schedule E if I am not actually making any rental income? 

Thank you

[macuser_22]

If you are not collecting any rent and have no income then there is nothing to put on a schedule E or report.   You cannot deduct expenses or mortgage payments that you do not make.

[Critter-3]

This is a simple case of family living in a home you own and helping pay the bills ... this is not a rental to be reported on the Sch E. 

[Carl]

You have nothing to report on your tax return concerning this, since the property is not "in fact" a rental property with your intent being to produce rental income. So this property is not reported as such on SCH E at all. Now if this was a rental property in 2018 that you reported on SCH E before your brother moved in, and you did not convert it to personal use on your 2018 tax return, then you'll need to convert it to personal use on your 2019 tax return with a conversion date of 1/1/2019.

Additionally, since your brother lives in the house as his primary residence, that means he has a legally vested interest in the property. Since he paid the mortgage interest and property taxes and can prove he did so, that proof combined with his proven vested interest gives him the right to claim the mortgage interest and property taxes as a SCH A itemized deduction on his return. You have no right to claim any deductions on the property, (not even as a SCH A itemized deductions) since you did not make the payments.

[Realstate]

As part of the application process for the loan, the bank made me sign a rental agreement with my brother, saying I would be collecting a monthly rent that equates to the amount of the monthly mortgage ($2052), if I remember right, the loan wouldn't have proceeded otherwise. 

If the IRS received a copy of the rental agreement, wouldn't they think I am receiving additional income?

Thank you

[macuser_22]

If you are not receiving any rent and did not intend to do so then you probably received the loan under false pretenses and the lender could probably recall the loan immediately.      You do not seem to be complying with the agreement that yiu signed.

      Without income from the rental and the intention to make a profit then  it is NOT rental property at all in the eyes of the IRS.

It is the landlords responsibility to pay the mortgage, property tax and necessary maintenance expenses.    Your brother should have been writing  a check to you each month for the agreed on rent rent and then you pay the mortgage and taxes so you have proof that you paid it.    As it is, you have not paid for anything.

[Realstate]

Thank you for your reply. I was just going through some old emails between me and the lender where I clearly let them know the monthly mortgage payment is coming directly from my brother's bank account. They even asked for his bank statement as proof. I am not sure what it means given the rental agreement I had to sign. 

In addition, my brother has a day care in the house and he just confirmed that he claimed part of the mortgage payment as a deductible for using a portion of the house as his day care.

Should I still not worry about schedule E? 

Thank you

[macuser_22]

If you had no rental income or loss then there is nothing to report on a Schedule E.