Yes, you do need to declare this as income, but where depends on a couple of factors. Why is it was below Fair Rental Value? Were you renting to a friend or relative? Is that the most you could get for rent? Did you have a profit motive?
It is probably a
Not-For-Profit Rental. If you do not carry on your business or
investment activity to make a profit, you cannot use a loss from the activity
to offset other income. You do not therefore, need to depreciate.
Not Rented for
Profit
Where to
report. Report your
not-for-profit rental income on Form 1040 or 1040NR, line 21. If you are filing
Form 1040 and you itemize your deductions, you can include your mortgage
interest and any qualified mortgage insurance premiums (if you use the property
as your main home or second home), and real estate taxes on
the appropriate lines of Schedule A (Form 1040). 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.
Presumption of profit. If your
rental income is more than your rental expenses for at least 3 years out of a
period of 5 consecutive years, you are presumed to be renting your property to
make a profit.
More information. For more
information about the rules for an activity not engaged in for profit,
see Not-for-Profit Activities in
chapter 1 of Pub. 535.
https://www.irs.gov/pub/irs-pdf/p535.pdf
