Taxes on a second mortgage

[YOPQIR1234]

I bought a second house in another state and I let my daughter and her mother live there and they pay all the expenses associated with owning a home and I make absolutely no money so my question is do I have to claim the money they pay for the mortgage as rental income. Would be grateful for any more information and suggestions. Thank you, Roy 

[DoninGA]

If the property is not rented for a profit then you do not enter the income received on Schedule E as rental income.

Go to IRS Publication 527 Residential Rental Property page 25 - https://www.irs.gov/pub/irs-pdf/p527.pdf#page=25

Not Rented for Profit
If you don’t rent your property to make a profit, you can’t deduct rental expenses in excess of the amount of your rental income. You can’t deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year.
Where to report. Report your not-for-profit rental income on Schedule 1 (Form 1040), line 8j. If you itemize your deductions, include your mortgage interest (if you use the property as your main home or second home), real estate taxes, and casualty losses from your not-for-profit rental activity when figuring the amount you can deduct on Schedule A.

[TomD8]

The IRS considers any day rented to a relative below FMV as a day of personal use.  If you have more than 14 days of personal use, then the IRS no longer considers the property to be rental property, and you lose all deductions except for mortgage interest and property taxes.

[Mike9241]

Since your daughter and her mother pay all the expenses including the mortgage and taxes, they may be deemed equitable owners. As equitable owners, they may be entitled to deduct the mortgage interest and real estate taxes. An equitable owner is a person who has the economic benefits and burdens of ownership, based on the facts. Occupying and maintaining the home and paying the mortgage and taxes on it are (strong) factors that probably would indicate equitable ownership. An equitable owner can deduct interest paid on a mortgage even if they are not directly liable on the debt. IRS REG. 1.163-1. Further, mortgage payments and taxes paid from a joint account with two equal owners are presumed to be paid equally by each account owner (absence evidence to the contrary). However, if payments are made from separate funds, each taxpayer is entitled to deduct all the interest and taxes they pay with their separate funds (CCA 201451027).  This would mean you do not get the eduction for the deductible expenses they pay. 

I would think that if they are equitable owners, you do not report as income what they pay on the property.