Rental Income Tax Reporting

[dwallace11]

Hi all,

     Thank you in advance for the wisdom to my question. My significant other and I are buying a house, and she is keeping her existing house but "renting" it to her mom and daughters. Her mom and daughters will be paying the mortgage amount, so therefore my significant other will not be profiting off of anything (mortgage cost example is 2000$, family will pay that 2000$).  Because this is a not for profit "income" since they are paying that exact mortgage and not netting any money, does my significant other have to report the money she receives to pay said mortgage as reportable income for tax returns?

[tagteam]

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@dwallace11 wrote:

    ........does my significant other have to report the money she receives to pay said mortgage as reportable income for tax returns?

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Yes, she has to report any income (rent) paid by her mom and daughters. 

If the mom and daughters are paying less than fair rental value, then every day rented to them is considered to be a day of personal use by your significant other ((per Section 280A).

Your significant other can likely deduction mortgage interest payments and property taxes on Schedule A, as itemized deductions if she itemizes.

[dwallace11]

Thank you so much for the information!

If she rents to them under fair market value, and therefore its used as personal use, does she still report the income on taxes? or does it lead to further deductions on return?

[tagteam]

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@dwallace11 wrote:

If she rents to them under fair market value, and therefore its used as personal use, does she still report the income on taxes? or does it lead to further deductions on return?

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She reports the income and can deduct mortgage interest and property taxes on Schedule A.