My sisters and I inherited house. We have rented to niece, pastor and caregiver of my parents folks we know that need a hand, all below market value. Turbo tax shows rates as $1700, I see some for $1100, I rent for $400-$800 depending on their ability and have waived late fees etc. I take care of all the finances. Have had some profit some years which we split, but would not call it a for profit business.
Is it better to list as rental under fair market or list as other income? Seems in answering sections with rental income I may not be reading correctly
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It depends. The IRS requires a 'for profit' rental to be able to use expenses against the income received for renting a home.
Presumption of profit According to IRS.
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. This means you don't have to show a profit every year, but must be trying to achieve a profit. Lower than fair rental value (FRV) for the rent being charged is a determining factor.
If you rent it at less than FRV then the income is still reportable and taxable, however it is reported differently. See the information from IRS Publication 527. Each of the sisters would report their share of income and allowable expenses below if itemized deductions are allowed.
Essentially the expenses are allowed as itemized deductions if you use this as your home or second home. If not, you an use only the real estate taxes, and casualty losses if applicable.
Reporting the income as Not for Profit:
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