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vflores1909
New Member

I have a rental home which I am renting to someone. I do not understand which is more beneficial, renting at a fair market rent or renting it below fair market?

 
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MinhT
Expert Alumni

I have a rental home which I am renting to someone. I do not understand which is more beneficial, renting at a fair market rent or renting it below fair market?

If you rent at fair market value, the IRS considers that you are renting for profit and you can deduct all rental expenses from your rental income even if this results in a loss.

If you rent your property below fair market value, the IRS considers that you do not rent your property to make a profit. In this case, you can deduct your rental expenses only up to the amount of your rental income. You cannot deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year.

Mortgage interest and property taxes paid are claimed in Schedule A as for your residence.

Please refer to this IRS document , especially the section on Not Renting for Profit on page 16 on how to report income and expenses:

https://www.irs.gov/pub/irs-pdf/p527.pdf


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MinhT
Expert Alumni

I have a rental home which I am renting to someone. I do not understand which is more beneficial, renting at a fair market rent or renting it below fair market?

If you rent at fair market value, the IRS considers that you are renting for profit and you can deduct all rental expenses from your rental income even if this results in a loss.

If you rent your property below fair market value, the IRS considers that you do not rent your property to make a profit. In this case, you can deduct your rental expenses only up to the amount of your rental income. You cannot deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year.

Mortgage interest and property taxes paid are claimed in Schedule A as for your residence.

Please refer to this IRS document , especially the section on Not Renting for Profit on page 16 on how to report income and expenses:

https://www.irs.gov/pub/irs-pdf/p527.pdf


**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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