How to report the rent income to a relative under the fair market value

[ANX]

I rent a room to a relative at a price under the fair market value and it is only enough to cover the utilities. Therefore, it does not generate any profit. I take the standard deduction. Can I deduct the utilities expense?  How do I report this in my tax return? 

[Vanessa A]

If you are renting to a family member at a rate under the fair market value, then you would enter the income as Other Income as the IRS considers this personal use and does not consider this rental income, however it is still taxable income.  You will enter this by selecting the following:

1. Federal
2. Income and Expenses
3. Scroll down to Less Common Income and click Show More
4. Start next to Miscellaneous Income
5. Start next to Other Reportable Income

No, you would not be able to deduct utility expenses or any other expenses you can normally charge as a landlord since it is considered personal use property.

However, if you are simply sharing expenses such as in a roommate or housemate situation, then this would not be considered income, and you would not need to report it.   You still would not be able to deduct the expenses, but you also would not have to report the income. 

[ANX]

Thank you for your response.

For the below comments, could you please point me to the IRS publication or website where the instructions are? 

'However, if you are simply sharing expenses such as in a roommate or housemate situation, then this would not be considered income, and you would not need to report it.   You still would not be able to deduct the expenses, but you also would not have to report the income. '

[MonikaK1]

If the amount you receive simply represents cost-sharing in the family home, then you don't need to report it as income at all.

If it's a more formal rental agreement and not just cost-sharing, you could report the income but only deduct expenses up to income. See this TurboTax tips article for more information on rentals and this article about how to enter the information. You would need TurboTax Premium (Online) or Premier (Desktop).

See this IRS tool to help determine whether rental income is taxable.

See IRS Publication 527 for more detailed information about rentals.

@ANX