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tasdms
New Member

Can you deduct rental expenses on Sch E if rental income is not at fair market value?

We have a 2 bedroom condo in which our non-dependent daughter does not pay rent while she is at grad school and her roommate pays rent at fair market .   Should we report the rental income from the roommate and only half of the deductible expenses on Sch E?

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Accepted Solutions
MinhT
Expert Alumni

Can you deduct rental expenses on Sch E if rental income is not at fair market value?

 You are correct.

If your daughter does not pay rent and only her roommate paid rent at fair market value, then you are considered as renting only half of your condominium. Your enter rent received from the roommate as rental income and deduct half of all rental expenses on Schedule E.

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4 Replies
TaxGuyBill
Level 9

Can you deduct rental expenses on Sch E if rental income is not at fair market value?

Unfortunately, it is not half for many of the expenses.  You can only deduct the percentage that is used exclusively by the renter.  For things like mortgage interest, real estate taxes and depreciation, shared spaces are not deductible (but you may be able to use half for some things, such as utilities).
tasdms
New Member

Can you deduct rental expenses on Sch E if rental income is not at fair market value?

This 2 bedroom condo is an investment property, not our main home   Shouldn't we be able to deduct some portion of the mortgage interest, real estate taxes and  depreciation against the rental income.
MinhT
Expert Alumni

Can you deduct rental expenses on Sch E if rental income is not at fair market value?

Please read this IRS document, especially the chapter on Renting part of Property on page 16: <a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/p527.pdf">https://www.irs.gov/pub/irs-pdf/p527.pdf</a>
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MinhT
Expert Alumni

Can you deduct rental expenses on Sch E if rental income is not at fair market value?

 You are correct.

If your daughter does not pay rent and only her roommate paid rent at fair market value, then you are considered as renting only half of your condominium. Your enter rent received from the roommate as rental income and deduct half of all rental expenses on Schedule E.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

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