topic Rental Income in Investors & landlords

Rental Income

PTimmerman — Mon, 27 Jan 2025 18:45:26 GMT

My husband rents his house to a friend for less than the mortgage. Do I still use Schedule E for tax reporting purposes?

Re: Rental Income

RobertB4444 — Mon, 27 Jan 2025 18:54:02 GMT

No.

Charging below fair market rental value to a family member means that the house is considered a second home. You can deduct the property taxes paid and the mortgage interest paid as part of your itemized deductions but that is all.

@PTimmerman

Re: Rental Income

PTimmerman — Mon, 27 Jan 2025 19:07:35 GMT

Robert, he's not renting to a family member. He rented it to a lady who is down on her luck to try and help her. However, it seems he's hurting himself. Am I correct in assuming that?

Re: Rental Income

ThomasM125 — Mon, 27 Jan 2025 19:33:48 GMT

He may be hurting himself as far as the tax return is concerned, in that he is paying tax on rent income that could be reduced by all associated expenses if he was charging a fair rent. I assume you mean by charging less than the mortgage payment that he is charging less than fair rent. If he charged fair rent, then he could deduct the mortgage interest, property taxes and other cost of maintaining the home directly against the rental income. Otherwise, only the mortgage interest and property taxes would be deductible as itemized deductions, which may have limitations.