Do I report as income the portion of rent received to pay utilities bills for my not-for-profit rental? I did this so the tenants didn't have to switch the utilities over

[bbraden01]

I charge my tenants a flat fee so their payment stays the same month to month but I cannot deduct the utility bills effectively on schedule A because I'm still below the standard deduction threshold.  If I have to report those funds received to pay my tenants utility bills as income it seems like in future years it would be advisable to lower their rent but make them pay the utilities directly so that I never receive the money therefore it would not be income?  There is no official lease that says what rent is and that I pay the utility bill from the rent received, that's just what we did this past year because the renter was helping me out by keeping the house occupied after I moved out.  I feel like I could deduct the utility bills off the top and not report it because they basically sent me money for rent as well as to pay their utility bills so that it didn't have to go into their name.

[PatriciaV]

It depends. Although this is a not-for-profit rental activity, your rental income would be the total rent plus the utility charge. If your expenses (mortgage interest plus property taxes and utilities) were more than the income you received, you are not required to report the income.

Otherwise, the rental income for this period is reported as Miscellaneous Income in the Less Common Income section at the bottom of Wages & Income.  

As your "second home", property taxes and mortgage interest may be included as Itemized Deductions (Your Home under Deductions & Credits).  

If the rental income exceeded the property taxes and mortgage interest for the property, you may deduct additional costs associated with the house (like utilities) as miscellaneous itemized deductions (Other Deductible Expenses under Other Deductions & Credits). The total of property taxes, mortgage interest, and other expenses that you deduct cannot exceed the amount of rental income you received.

Unfortunately, if you don't have enough Itemized Deductions to exceed the Standard Deduction, you won't be able to claim the expenses related to the rental property. Again, if the total of rent plus utility charge is more than your expenses, you do need to claim the difference.

For example, if you charge $400 rent and $100, and your actual utilities are $90, you would claim $400 + $100 - $90 = $410 of Miscellaneous Income.

[eaptls]

Where does IRS Pub 527 say " If your expenses (mortgage interest plus property taxes and utilities) were more than the income you received, you are not required to report the income"? Can you cite a reference for this claim?