Renting condo to family/friends without profit

Forum|Forum|4 years ago
February 2, 2022
11 replies
71 views

Hey Guys,

If I were to rent my condo to family/friends for exact amount of my mortgage + insurance + HOA and they pay me via check or any online money transfer services, does it becomes my income where I have to claim on my taxes next year? And do I get to deduct the interest I paid through out the year on that mortgage?

I am trying to rent my condo to a family/friend and only planning on charging them whatever my mortgage + insurance + HOA is.
I do not want to be in a condition next year where I get taxed on the rent I received and cannot deduct the interest I paid on that mortgage.

Thanks.

Not A Product Question

AmyC

Alumni - Intuit

Yes, you will claim the income along with expenses to maintain, mortgage interest, etc and you will claim depreciation. Start with What kinds of rental property expenses can I deduct?

See:

About Schedule E (Form 1040), Supplemental Income and Loss &

Publication 527 (2020), Residential Rental Property - IRS

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

aqua_manAuthor

Level 2

@AmyC Thank you for your response.

I have an additional question, would I be able to deduct the interest which I paid on the mortgage through out the year?

Also, if I'm claiming the rent as income and going to pay taxes on it, I'll be losing money come tax season.

For example, if my mortgage is $1000, I collect $12000 per year, will that $12000 becomes my income and would I have to pay taxes on it? Because technically I didn't make any profit on it, so I should not be paying taxes on that rent.

JohnB5677

Alumni - Intuit

Yes, you should include the income and the interest on Schedule E, but because you rent to relatives it can be tricky.

You must charge a fair-market rent.
To prove the rent rate is fair, you can get information from places where similar properties are listed for rent, such as Craigslist.
You can also get a rental appraisal from an independent appraiser or a realtor.

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

Carl

Level 11

When renting to family at below FMRV, you can only deduct those expenses up to the income received. Expenses that exceed the income are lost, and can not be carried over.

If rented "not for profit" then schedule E isn't used, and no expense deductions are allowed at all. However, you can still claim mortgage interest and property taxes as a SCH A itemized deduction. But as usual, your itemized SCH A deductions don't make any difference to your tax liability until they exceed your standard deduction.

Anonymous_

Level 15

@Carl11_2 wrote:

When renting to family at below FMRV, you can only deduct those expenses up to the income received.

It is a day of personal use even if the owner charges "FMRV" unless the family member (as defined in Section 267(c)(4)) uses the rental as a principal residence.

TomD8

Alumni - Champ

Property rented to a family member (or anyone else) below FMRV is not considered rental property by the IRS, and income and expenses are not reported on Schedule E.

https://www.irs.gov/newsroom/know-the-tax-facts-about-renting-out-residential-property

**Answers are correct to the best of my ability but do not constitute tax or legal advice.