My brother and I co own a condo - we pay the mortgage, HOA and Taxes from a joint account (my brother and I)
That's fine. HOA dues are not a deductible expense on any tax return, since the property is a "2nd home" and is not used in a business capacity of any type. If both are listed on the deed, then the one who actually pays the property taxes can claim those payments on their tax return. If paid from a joint account then there's no problem with how you split it between the two owners. You can split any way you like, or one of you can take the entire deduction for property taxes.
- he gives us money monthly, well below market rate and pretty much just covers these costs.
Who is "he"? Your brother that is also an owner of the property? Or a third party?
Is this Misc income and reportable? Or because it is personal use and "not for profit" is this not taxable?
If 'he" is a third party that has no ownership in the property, then it's reportable income any way you look at it. Understand that the part of the mortgage payment that is deductible is the mortgage interest only. The principle part of the payment is reportable income to the owner(s)/recipient(s) any way you look at it.
Just because the third party tenant is only "making the payments" does not mean you don't have taxable profit.
The only person(s) that can claim the mortgage interest and property taxes is/are the one(s) who are legally obligated to pay it; regardless of who "actually" pays it. The fact the third party tenant is "only making the payments" does not mean the property is not being rented. That alone is not enough to declare you're not using the property to produce income; which is passive income that would be reported as such on SCH E.
When renting below FMRV and reporting the income for what it really is (rental income) on SCH E, there's pros and cons to that.
The "pro" is that the taxable part of the mortgage payment (the principle) is generally offset by the depreciation you are required by law to take on the property. It is rare for rental property to actually show a taxable profit "on paper", especially if the property has a mortgage on it.
The "con" is that when renting below FMRV, suspended losses are not allowed. So any deductible rental expenses that exceed your taxable rental income can not be carried over and you just lose them permanently and forever. This has the potential to really hurt tax-wise in the year you sell the property and are required to recapture all prior year's depreciation and pay taxes on it.
If you report it as misc income then it's 100% taxable. The mortgage interest is then claimed on SCH A (instead of SCH E) and is subject to the SALT (State & Local Taxes) limits as well as the limit on allowed mortgage deductions on the SCH A which can not exceed a total of $1M. So if the total outstanding balance on all mortgages on the SCH A exceed $1M, then the interest paid on the amount over $1M is not deductible.
THere is no mortgage balance limit for rental property reported on SCH E.
