The IRS states, "A fair rental price for your property generally is the amount of rent that a person who is not related to you would be willing to pay. The rent you charge is not a fair rental price if it is substantially less than the rents charged for other properties that are similar to your property in your area.".
There was at least one ruling that if the rental price was equal to 80% or more of the fair rental value, the rental price was considered to be "fair rental value". So, "substantially less" appears to be more than 20% less than fair rental value.
The IRS states, "A fair rental price for your property generally is the amount of rent that a person who is not related to you would be willing to pay. The rent you charge is not a fair rental price if it is substantially less than the rents charged for other properties that are similar to your property in your area.".
There was at least one ruling that if the rental price was equal to 80% or more of the fair rental value, the rental price was considered to be "fair rental value". So, "substantially less" appears to be more than 20% less than fair rental value.
Any rents you receive are considered income, regardless of if you renting at or below fair market value.
Report the rental income and expenses in the rental section, as you normally would. You will get to a screen asking you if you are renting at or below FMV, and if you are renting to family. If you indicate you are renting below FMV then TurboTax will take care of things for you.
If you are renting below market rate, you will not be allowed to deduct any rental expenses that exceed your rental income. If you are itemizing your deductions, you may be able to include expenses like mortgage interest and property taxes with your itemized deductions.
Hello CatinaT1, renting below fair market value to a relative. Can I just use Turbo Tax Delux version? Looks like I'm not deducting any repairs or maintenance. Thanks again, your response was very helpful
Yes, you will be able to use TurboTax Deluxe for your situation.
Please refer to this IRS document, especially the section on Not Renting for Profit on page 16 on how to report income and expenses.
@B4udotaxes
@B4udotaxes wrote:
.....renting below fair market value to a relative. Can I just use Turbo Tax Delux version? Looks like I'm not deducting any repairs or maintenance.
If you are renting below fair rental value to a relative, every day you do so is considered a day of personal use (per Section 280A).
You cannot deduct any expenses beyond mortgage interest, real estate taxes, and casualty losses on Schedule A.
Correct, but can I use the Deluxe version of Turbo Tax for this? Thank you,
@B4udotaxes wrote:
Correct, but can I use the Deluxe version of Turbo Tax for this?
Yes.
If you're using the CD version that you installed on your computer, Deluxe is fine. If using the online version, you have to use Premier or higher "I think". I'm not sure if he online version of Deluxe includes SCH E or not.
@Carl wrote:
I'm not sure if he online version of Deluxe includes SCH E or not.
The online version does not include Schedule E, but Schedule E is not needed for this transaction.