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mel8912
New Member

Do I need to report rental income that was below fair market value and was less than my mortgage interest and property taxes combined?

I ran across this answer that says you don't have to report rental income if it's less than the mortgage interest & property taxes. Is this correct?

https://ttlc.intuit.com/questions/3809228-i-have-not-for-profit-rental-income-turbotax-has-prepared-...
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Accepted Solutions
Coleen3
Intuit Alumni

Do I need to report rental income that was below fair market value and was less than my mortgage interest and property taxes combined?

Yes, you do need to report it, you just don't report it on Schedule E. It is a Not-for-Profit Rental. See below for a link to Pub 535. It does not address the statement, " I ran across this answer that says you don't have to report rental income if it's less than the mortgage interest & property taxes." Some of it applies to hobby income, such as cost of goods sold.

You can deduct your mortgage interest and property taxes on your second home up to allowable limits.

Not-for-Profit activities start on page 7.  https://www.irs.gov/pub/irs-pdf/p535.pdf 

Gross income from a not-for-profit activity includes the total of all gains from the sale, exchange, or other disposition of property, and all other gross receipts derived from the activity. Gross income from the activity also includes capital gains and rents received for the use of property that is held in connection with the activity. You can determine gross income from any not-for-profit activity by subtracting the cost of goods sold from your gross receipts. However, if you determine gross income by subtracting cost of goods sold from gross receipts, you must do so consistently, and in a manner that follows generally accepted methods of accounting. 

Limit on Deductions You can no longer claim any miscellaneous itemized deductions. Miscellaneous itemized deductions are those deductions that would have been subject to the 2%-of-adjusted-gross-income limitation. You can still claim certain expenses as itemized deductions on Schedule A (Form 1040). Deductions you can take for personal as well as for business activities are allowed in full. For individuals, all nonbusiness deductions, such as those for home mortgage interest, and taxes may also be deducted. Deduct them on the appropriate lines of Schedule A (Form 1040).

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1 Reply
Coleen3
Intuit Alumni

Do I need to report rental income that was below fair market value and was less than my mortgage interest and property taxes combined?

Yes, you do need to report it, you just don't report it on Schedule E. It is a Not-for-Profit Rental. See below for a link to Pub 535. It does not address the statement, " I ran across this answer that says you don't have to report rental income if it's less than the mortgage interest & property taxes." Some of it applies to hobby income, such as cost of goods sold.

You can deduct your mortgage interest and property taxes on your second home up to allowable limits.

Not-for-Profit activities start on page 7.  https://www.irs.gov/pub/irs-pdf/p535.pdf 

Gross income from a not-for-profit activity includes the total of all gains from the sale, exchange, or other disposition of property, and all other gross receipts derived from the activity. Gross income from the activity also includes capital gains and rents received for the use of property that is held in connection with the activity. You can determine gross income from any not-for-profit activity by subtracting the cost of goods sold from your gross receipts. However, if you determine gross income by subtracting cost of goods sold from gross receipts, you must do so consistently, and in a manner that follows generally accepted methods of accounting. 

Limit on Deductions You can no longer claim any miscellaneous itemized deductions. Miscellaneous itemized deductions are those deductions that would have been subject to the 2%-of-adjusted-gross-income limitation. You can still claim certain expenses as itemized deductions on Schedule A (Form 1040). Deductions you can take for personal as well as for business activities are allowed in full. For individuals, all nonbusiness deductions, such as those for home mortgage interest, and taxes may also be deducted. Deduct them on the appropriate lines of Schedule A (Form 1040).

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