How do I properly account for a not-for-profit, out-of-state property rental?

[Brad59]

I have a not-for-profit, out-of-state property rental where the following conditions apply;

1. I pay the monthly utilities, and my tenants reimburse me in cash for the utilities they use (gas, electric, etc). This is the rent I receive (which is well below a fair market rental in that area of the USA).

2. I pay the yearly property taxes.

3. I pay for all any, and all repairs (including a new roof install and electrical conduit repairs - in 2023).

I'm certain all of this will be placed into a Schedule E (Form 1040) by TurboTax (repairs and taxes values on lines 14 and 16, respectively). But I'm not sure if the cash I receive as reimbursement of the utilities qualifies as rents received (Line 3 in Schedule E form) versus Utilities (Line 17).

Any advice/insight on this matter is greatly appreciated.

Thank you.

[TomD8 · Accepted solution]

If you rent not-for-profit, then you do not use Schedule E.  Your income is instead reported on Line 8 of Schedule 1 (Form 1040).  Your expenses are reported on Schedule A, if you itemize.  You can't deduct expenses in excess of your rental income.  You can't deduct a loss or carry forward any unused rental expenses.  If you itemize, you can deduct mortgage interest, property taxes, and casualty losses only.

[Brad59]

TomD8,  thank you for your reply.

Follow up question: You say, "Your income is instead reported on Line 8 of Schedule 1 (Form 1040)."

I'm assuming you are referring to the money my tenants reimbursed me for the utilities?

Since the money I receive from my tenants is equal to the amount I paid for the utilities, I'm confused as to why I need to report this?

Thank you.

[TomD8]

Per the IRS:

"If your tenant pays any of your expenses, the payments are rental income. You must include them in your income. You can deduct the expenses if they are deductible rental expenses."

https://www.irs.gov/businesses/small-businesses-self-employed/rental-income-and-expenses-real-estate...

[Brad59]

OK, so I report this as income on Line 8 of Schedule 1 (Form 1040). I'm using TurboTax and I'm not sure which line I would expect to see it on (Line 8j, 8z, etc.).

What line would you expect this to be showing on the 1040 Schedule 1?

[TomD8]

Line 8z.  You would enter a description such as "NFP rental income".

[Brad59]

OK, this makes more sense. Now if I could just figure out where and how to account for this using TurboTax I'm set.

Thank you.

[TomD8]

I'd suggest entering it under Less Common Income > Miscellaneous Income > Other reportable income.