Not for profit rental income under $15k

[Rypley]

I own a duplex and my significant other lives in one half. I charge below fair market value making it a personal use property.  The “rent” they pay is below $15,000 per year (total of $6000) Can I consider this a non/taxable gift or do I need to report it as other income? 

[Rypley]

I should also mention that the fair market value would be about $12,000 per year, which is still under the acceptable amount of non taxable gifts, so I don’t believe any “gift giving” I am doing would be taxable as it also falls under the $15,000 annual threshold. 

[Carl]

It's other income. You can't consider it a gift, because you are providing something in return for that money.

[Rypley]

Dang. And I can’t offset the expenses by deducting mortgage interest and taxes because it’s not considered a rental if I charge below market value? So I basically have to pay the IRS extra for being generous is what it sounds like. 

[Rypley]

Could I consider it to be contributions toward living expenses in a shared household? 

[Carl]

Most likely, yes. But then be aware you have nothing to report on SCH E or anywhere else on your tax return concerning it, and if not reporting the income, you can't claim any expenses either.

However, if your state taxes personal income and offers a "renter's credit", and the other occupant wants to take that credit (and they qualify to claim it), then you really have no option but to report the income on SCH E.

[Rypley]

Thank you Carl! I got the impression I couldn’t report any expenses for a rental under market value at all unless it is reflected on schedule A and I itemize my deductions. If I itemize I will be paying more as the expenses are less than my standard deduction. You think I would be okay considering as contribution to living expenses and not doing a schedule e or reporting as other income? 
another thought I had was equating the total of the annual rent to an amount of days it was rented at fair market value. I.e, FMV for rent annually would be $12,000, and I collected $6,000. Could I consider half of the year to be a rental and claim the expenses for that? 

[Carl]

You're creating a scenario that, if you are pulled for a random audit (unlikely, but not impossible) will put you in a nightmare you will never awaken from. 🙂 

Typically when two "room mates" live together and share expenses, there is no profit motive by either. So there's nothing to report. Either you're room mates sharing expenses, or you're not. If not, then report the facts on SCH E or as other income; whichever applies. Nothing more. Nothing less.