Not for profit rental income.

[jedi_nj]

I have rental income that is "not for profit".  I do not have a 1099.  How do I enter the income in Turbo Tax?

[ColeenD3 · Accepted solution]

Just enter the amount of rent you collected as cash. Not everyone receives a 1099.

Not Rented for Profit

If you don’t rent your property to make a profit, you can’t deduct rental expenses in excess of the amount of your rental income. You can’t deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year.

Where to report.

Report your not-for-profit rental income on Schedule 1 (Form 1040), line 8. If you itemize your deductions, include your mortgage interest and mortgage insurance premiums (if you use the property as your main home or second home), real estate taxes, and casualty losses from your not-for-profit rental activity when figuring the amount you can deduct on Schedule A.

Presumption of profit.

If your rental income is more than your rental expenses for at least 3 years out of a period of 5 consecutive years, you are presumed to be renting your property to make a profit.

Postponing decision.

If you are starting your rental activity and don’t have 3 years showing a profit, you can elect to have the presumption made after you have the 5 years of experience required by the test. You may choose to postpone the decision of whether the rental is for profit by filing Form 5213. You must file Form 5213 within 3 years after the due date of your return (determined without extensions) for the year in which you first carried on the activity or, if earlier, within 60 days after receiving written notice from the IRS proposing to disallow deductions attributable to the activity.

More information.

For more information about the rules for an activity not engaged in for profit, see Not-for-Profit Activities in chapter 1 of Pub. 535

[tdmorganmc]

I am so confused how to report not for profit income from my daughter who is a travel nurse. I added the not for profit income of $1500 and received a response that it was over $400 and I need to report it as income. Is this correct?

[Vanessa A]

Where did you enter the income?  Did you enter it as rental or self-employment income?  It should be reported as rental income on Schedule E, not self-employment income on Schedule C.

Because you are renting it to your daughter without the intention of making a profit, you can deduct can deduct expenses up to the amount of income you are reporting but you cannot deduct expenses in excess of the rental income and you cannot carry forward any losses. 

To enter your rental income so that it is reported on Schedule E take the following steps:

• Federal
• Business Income
• Rental Properties and Royalties
• Start
• walk through and answer the questions

[tdmorganmc]

I listed it as other income.

[DaveF1006]

It should be reported in the manner as Vanessa A has outlined above. After you have listed the  rental income and recorded  the expenses, the program will determine rather or not you have a profit. As Vanessa mentions, you may deduct expenses up to the amount of rental income

You would list it this way because this type of reporting is what the IRS requires to report rental activity because of the depreciation involved in rental activity. A record of depreciation is necessary in case if you sell your property later because depreciation recapture is used by the IRS to collect taxes on the sale of an asset that a business had previously used to offset its taxable income through the years.

@tdmorganmc 

[tdmorganmc]

Once I select rental and royalty selection, what category do I choose? Is it single family, self rental or other?

[TeresaM]

Select the type of building it is. If you live in a single family home and rent out a room to your daughter, select single family. If it is an condominium or duplex, select Multi-family. 

Continue to answer questions and you can also click on the blue links for more information. 

[lasher10]

I am really having issues with this. I specially upgraded to TurboTax Premier just for this. I live in California. I have a second home in Idaho that my son, his wife and my daughter live in and pay below fair market rent. I had my taxes done by an accountant last year and from what I can tell, he prepared them as if the rent charged was fair market rent with depreciation of the asset etc.... This seems to be the only way Turbo Tax Premier allow me to do it. When entering Rental Income Schedule E, it will delete the rental once I enter the amount of days the home was at fair market rent (which is 0). It then tells me to enter the rent I did receive under Other Reportable Income and Expenses in Deductions and Credits. I enter the rent income (which substantially increases my tax liability). But there is no place that I can find to put the Expenses.

The other option on this form from the IRS article states: Report your not-for-profit rental income on Schedule 1 (Form 1040), line 8. If you itemize your deductions, include your mortgage interest and mortgage insurance premiums (if you use the property as your main home or second home), real estate taxes, and casualty losses from your not-for-profit rental activity when figuring the amount you can deduct on Schedule A.

I don't see how to do this within the software and a couple of you are saying this is incorrect.

Help.

[DawnC]

If you rented out a property all year for less than fair market value, it is treated as a personal residence, not a rental property.  It is other reportable income and you can only deduct the same expenses you can deduct for your primary personal residence - on Schedule A.   @lasher10 

You can't take rental expenses on a property for any day you rent out at less than fair market value.   You may be able to deduct mortgage interest and property taxes as you do on your primary residence if you itemize - On Schedule A, but no rental deductions on Schedule E.  

If you want to claim the rental deductions, be sure the rate you charge your tenants is roughly equal to comparable properties in the same area.  Contact brokers or real estate agents for an appraisal of your property.   

If you do choose to rent the property to a friend or relative below market value, be sure to reflect this on your tax return.  You will still be able to claim property taxes on the property, as well as your mortgage interest if the rental is your secondary property.   These Schedule A deductions are entered in the Deductions and Credits section under the Your Home section.   

You don't need premier if you are not using Schedule E.   You can Clear and Start Over to go back to Deluxe.  

[lasher10]

So why is DaveF1006 and Vanessa A in earlier comments to the original post saying to go the Schedule E route and another is saying Schedule 1 Line 8 to report Rent Income? You all have Employee Tax Expert titles and that's why it's so confusing.

[ee-ea]

As the saying goes "There is more than one way to skin a cat."  There is more than one way to show the rental is not for profit.  The experts set out two of the ways.

[randag2600]

All the experts' talk of schedules presumes that users are filling out forms directly, rather than using a software package that is supposed to help us get the right information into the right lines of those forms!!  The question is how do we navigate to the TurboTax prompts for entering not-for-profit rental income??

[JamesG1]

If you do not rent your property to make a profit, you cannot deduct rental expenses in excess of the amount of your rental income. You cannot deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year. 

Report your not-for-profit rental income on Schedule 1 (Form 1040), line 8. 

Post the income as follows:

• Down the left side of the screen, click Federal.
• Down the left side of the screen, click Wages & Income.
• Scroll down to Less Common Income and click on the dropdown menu.
• To the right of Miscellaneous Income, 1099-A, 1099-C, click the Start / Revisit button.
• To the right of Other reportable income, click the Start / Revisit button.
• At the screen Any Other Taxable Income, click Yes.
• At the screen Other Taxable Income, enter a description such as “Not for profit rental” and the amount.
• Click Continue.

If you itemize your deductions, include your mortgage interest (if you use the property as your main home or second home) and real estate taxes from your not-for-profit rental activity when figuring the amount you can deduct on Schedule A.

See Not Rented For Profit, page 25, IRS Publication 527 Residential Rental Property.