gift tax question

[tchen2729]

I let my adult son lives in my second home. 

1. I collect 500 dollars per money from him to pay HOA fee, property tax, house insurance cost and other expense.

2. He pays utility directly out of his pocket.

 dollars 

The fair market rent is 1350 dollars per month. For 12 month it is 16200 dollars. In this case, do I give him a non-cash gift amount of 16200 dollars or 162000 - 6000 = 10200 dollars? Is this leagle?

[DoninGA]

You do not have Gift situation. 

What you have is a Not-for-Profit rental.

You report the income as ordinary income on Schedule 1 Line 8.  You report the expenses such as mortgage interest, property taxes as itemized deductions on Schedule A.  The amount of expenses cannot exceed the amount rental income received.

See IRS Publication 527, Residential Rental Property page 16, Not Rented for Profit - https://www.irs.gov/pub/irs-pdf/p527.pdf#page=16

[tchen2729]

Thanks

[Carl]

Just understand this is still reported on SCH E. But you must mark the checkbox to indicate you are renting at below fair market value. Also select the box to indicate you are renting to family. Your deductible rental expenses are limited to the rental income and carry over losses are not allowed. Checking the two boxes indicated above lets the program know that, so that no carry over losses accumulate.

[tagteam]

Each day a member of your family uses your real property is  considered to be a day of personal use by you unless that family member is using the property as his or her primary home and is also paying a fair rental price, 

See https://www.irs.gov/publications/p527#en_US_2019_publink1000285457

See also I.R.C. § 280A(d)(2)(C)

As a result, your deductions are limited to real estate taxes (subject to limitations), mortgage interest (subject to limitations), and casualty losses.

[tpe]

I am very clear on not-for-profit rent reporting. But i am not clear on the gift tax part, one more time, Do I need to report the difference between the fair market value and the paid amount using the form of 709 (gift tax reporting) regardless the difference is less than annual exclusion?

[tagteam · Accepted solution]

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@tpe wrote:

Do I need to report the difference between the fair market value and the paid amount using the form of 709 (gift tax reporting) regardless the difference is less than annual exclusion?

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No, you do not need to report the difference since it is less than the annual exclusion amount ($15,000).

See https://www.irs.gov/instructions/i709#idm140554828343488

[tpe]

Thanks