Do I have to report below market rent from an elderly parent

[plumparlor]

At the end of 2017 we bought a second home for the purpose of housing my elderly father.  He had become homeless and was living in his truck.  He has no assets and lives on a small social security check. My father does not have any ownership interest in the property at all.

He now pays us a nominal rent of $209.00 a month.  We cover all utilities plus cable, which are in our name, for him.  The rent is significantly less than the $1224.00 PITI we pay on the house each month.  It is also way below market rate rent for the house which is about $1132.00 per month.

So, the property is a second home for personal use only.

We will not have enough itemized deductions for 2018, given new tax laws, to itemize deductions (even with the PITI we pay on the house).  Even if we could itemize, and we had enough expenses against the property to equal the 209 a month in rent, I doubt we could take the deduction because of the 2% of Gross income stipulation on that sort of deduction.

My question is whether I need to report my fathers rent as income to the IRS.  I found this link to a Turbo Tax response to a similar question which implies that I shouldn’t have to report the rent since it is:

1.       For a Second home in 100% personal use

2.       From a relative

3.       Below market value rent

4.       Less than the monthly mortgage payment on the house

 https://ttlc.intuit.com/questions/3809228-i-have-not-for-profit-rental-income-turbotax-has-prepared-...

However, other things I’ve read do not make this clear.  So I would like to confirm with someone whether I need to report this income or not.

[Carl]

For starters, what you are doing for dad is commendable. So many of today's younger generation has to issues with kicking mom and dad to the curb. So I'll be damned if I'm going to allow the IRS to soak you or penalize you for being a good son/daughter. (whatever the case may be.)

Here's how things work on the legal front for this. If you show this as a rental property this will NOT help you tax-wise. That's because when renting below FMRV you can only claim your rental expenses up to the amount of the rental income, and you can "NOT" carry over the excess to the next year. You you "lose it" permanently and forever. So at $209 per month you're only collecting 2508 a year in rental income. That doesn't even cover the mortgage interest, and it definitely doesn't cover both the mortgage interest and the property taxes. We won't even talk about the depreciation you're required to take by law on rental property. Therefore you should consider this a 2nd home.

For the $209/mo you're paid by dad, consider it a "gift" from dad. Gifts of less than $15K in a tax year are flat out not required to be reported on "ANY" tax return.

Treat the house has your 2nd home and claim the mortgage interest and property taxes on SCH A in the "your home" section, along with the mortgage interest and property taxes for your primary residence.

[plumparlor]

Carl,  Thank you!