You may claim it as income. Per the IRS, "If you do not rent your property to make a profit, 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."
Per the IRS, you would report your not-for-profit rental income on Form 1040, line 21, Other Income.
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), real estate taxes, and casualty losses.
Claim your other rental expenses, as miscellaneous itemized deductions on Schedule A (Form 1040), line 23.
For more information, please see this IRS link: https://www.irs.gov/publications/p527/ch04.html#en_US_2016_publink1000219164
You may claim it as income. Per the IRS, "If you do not rent your property to make a profit, 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."
Per the IRS, you would report your not-for-profit rental income on Form 1040, line 21, Other Income.
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), real estate taxes, and casualty losses.
Claim your other rental expenses, as miscellaneous itemized deductions on Schedule A (Form 1040), line 23.
For more information, please see this IRS link: https://www.irs.gov/publications/p527/ch04.html#en_US_2016_publink1000219164
answered as if were using a hard paper form 1040. Turbotax doesn't work this way. Please answer as if using the software.
Agreed with commenter above. I'm in this situation and have no idea where to report this within the online software either.
Go to Less Common Income, then Misc. Income, then Other Reportable Income
thanks for the response, but I still didn't understand how does it matter that rent was or was not fair market. This might particularly apply to me because two of my properties have rent stabilized tenants, and I am charging rents lower than what's common in the neighborhood
My rental rates are suppressed below market rates because the county has tight rent controls, allowing annual increases at only 60% of CPI. As such, are the apartment owners supposed to be penalized further by losing deductibility of expenses in Fed taxes?
See the response at this link:
And what is also concerning is that the software does not seem to work even when you put the deductions related to real estate rented below FMV in this field. The response notes, "You can deduct these expenses only if they, together with certain other miscellaneous itemized deductions, total more than 2% of your adjusted gross income." Amounts I entered totaled well over 2%, and the software did not allow the deduction.
I think these responses that suggest the expenses can be deducted are incorrect.
I was including these expenses in misc itemized deductions, but this is what Pub 529 says: "...you can no longer claim any miscellaneous itemized deductions, unless you fall into one of the qualified categories of employment claiming a deduction relating to unreimbursed employee expenses. Miscellaneous itemized deductions are those deductions that would have been subject to the 2% of adjusted gross income limitation. You can still claim certain expenses as itemized deductions on Schedule A (Form 1040, 1040-SR, or 1040-NR) or as an adjustment to income on Form 1040 or 1040-SR."
If you check Sch A itemized deductions and 1040 adjustments to income, those are very specific. Even line 16, Other Itemized Deductions, can include only what is listed in the instructions. Per the instructions, "Only the expenses listed next can be deducted on line 16." I don't find any mention of expenses related to real property rented below FMV.
But you are required to report the income, although there is NO profit. How is that fair?
And one more piece of supporting documentation:
"If you do choose to rent the property to a friend or relative below market value, just be sure to reflect this in your tax return. You will still be able to claim property taxes on the property, a well as your mortgage interest if the rental is your secondary property."
There is no mention of claiming mortgage payments or any other expense "up to the amount of the income." Source: https://laporte.com/knowledgecenter/tax-services/tax-consequences-of-charging-below-market-rent
And at this link
https://finance.zacks.com/deduct-expenses-renting-children-8638.html
you can find the direct opposite advice...that you can claim deductions up to the amount of the income, so I don't know which is correct.
You are posting to a thread that is very old ... the june 2019 dates were applied when the old forum was migrated to this current forum so you cannot go by the dates.
Under the new rules you cannot claim expenses on a not for profit rental on the Sch A from 2018 to 2026 (or until congress changes the rules again). The income is reported on the current Sch 1 line 8 ( old 1040 line 21) ...
Follow these directions to post 1099-Misc, box 3 income not subject to self-employment taxes.
The income will be reported on Schedule 1 line 8 with the description that you entered.
Report the rental income/expenses in the rental section, as you normally would. Some screens will ask you if you are renting at below FMV, and ask you if you are renting to family. If you indicate you are renting at below FMV then the program will take care of things for you.
You still enter all your expenses, even if they exceed the rental income. The program will take care of any splits required. (if any are required) between SCH E and SCH A.
Also note that the program will take care of disallowing any carry overs if you are in fact, renting at below FMV. One possible issue with this, is that if you were renting at FMV in the past which allowed carry overs, then the first year you rent below FMV, you lose all those past year carry overs permanently and forever.
If the rent rebate is available in TurboTax, it will be included in the state interview section. If it is the Pennsylvania Rent Rebate you can review the information and submit it by mail.
TurboTax does not support Form PA-1000, property tax or rent rebate claim. You can complete and mail in the form using the link below.
Please update here it you are referring to another state.
Where and how do you enter rental property expenses in Turbotax for below market rental property if you take a standard deduction?
Here is information from the IRS Publication 527 about renting below market price. Expenses are to be entered on Schedule A. There is no provision for not reporting the expenses another way.
I have two rental's one I rent to my daughter below fair market value, the other to my friend's son.
You may claim it as income. Per the IRS, "If you do not rent your property to make a profit, 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."
Per the IRS, you would report your not-for-profit rental income on Form 1040, line 21, Other Income.
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), real estate taxes, and casualty losses.
Claim your other rental expenses, as miscellaneous itemized deductions on Schedule A (Form 1040), line 23.
For more information, please see this IRS link: https://www.irs.gov/publications/p527/ch04.html#en_US_2016_publink1000219164
Per @
joanfukai
When you talk about carry overs, do you mean rental expenses that are being depreciated? Would that include depreciation on the rental home itself?
We have a property that we rented at FMV for several years, currently we are renting to family members at below FMV. Since we have property management we get a 1099-misc. I have been trying to figure out where to list this. It is box 3 rents, so when I list it as a 1099-misc it asks me about FMV and then shows up in the rental section of the program...but I'm told not to list expenses on below FMV property there. I'm taking standard deduction and apparently we cannot list expenses on Schd A anymore in any case.
Is the answer to list the entire amount in other reportable income as some have suggested or is it true that I can list the expenses on Sched E and that the program will adjust them to be no more than the income? I have used depreciation on the property and some things such as appliances in the past, I don't need to use those as an expense this year but do not want to lose the ability to depreciate when I return to FMV in the future. Any helpful knowledge about this puzzle piece in my return is appreciated.
It depends. You may want to test this in TurboTax, which allows you to compare results from different strategies before you finalize your return. (This is easier in the CD/Download version, but can be done using TurboTax Online.)
First, enter Form 1099-MISC under your existing Rental Property, answer the FMV questions accurately, and report expenses as usual. Then review your tax summary to see if your entries were handled as you expected.
You should have zero net income from the Rental Property (per the IRS limitations on renting below FMW), but see some portion of your mortgage interest and property taxes reported as Itemized Deductions. (These items won't have much affect if you don't itemize.)
If this isn't the result you expected, try entering the 1099-MISC under Less Common Income and the interest & taxes under Your Home (as a second home), but don't enter more than the amount of rent you were paid. Then review your tax summary again.
Choose the strategy that gives you the best outcome for your tax situation.
Additional info: