Rental Property

[cstarlin]

We purchased a second home for my daughter and grandchildren to live in.  She only paid a small amount for rent not enough to carry the total expenses of the house or to care for the up keep we covered paid homeowners taxes, property insurance and flood insurance as well as anything else needed for the home i.e appliances, flooring etc.  We never reported the income on the home since we made no profit off the home, I assumed it did not need to be reported.  We have since sold the home and when filing the question was asked was this a rental property.  I want to be truthful, was it considered rental property and will, I now be audited by the IRS for back years, should I go back and amend, I have copies of all paid receipts, should I contact the IRS for answer   

Thank you, and help will be greatly appreciated made an appointment with the IRS, to discuss

[DianeW777]

The rules for a not-for-profit rental are shown below for you. Because this was a not-for-profit rental then you were not allowed to take any depreciation on the property. For this reason it will not affect your sale in 2024, and you should not indicate that it was previously rented. It was not a for profit rental property.

The income was required to be reported.  You can amend your tax returns for 2021, 2022 and 2023 to include that income using the steps below. 

• How do I amend my federal tax return for a prior year?

The not-for-profit rental income is reported as follows and can be found in IRS Publication 527. 

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.

Sign into your TurboTax account:

1. Click Tax Home  in the left panel
2. Click Wages & Income  > Review Income
3. Scroll down to Less Common Income. Click Show more
4. Start or Revisit Miscellaneous Income, 1099-A, 1099-C
5. Scroll to select  Other reportable income
6. Say Yes to Any Other Taxable Income?
7. Enter a description and amount