Do I report rental income if I live in my primary residence for more than 3 months out of the year with with my daughter and her boyfriend who pay rent full time?

Forum|Forum|3 years ago
April 4, 2023
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In total, they pay less than the monthly mortgage due.

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Best answer by TomD8

When you rent to a family member below FMV, it is considered personal use of the property. The rental "portion" is zero. Any income you receive above cost-sharing is reported as Other Income on Line 8 of Schedule 1 of your 1040. It is not reported on Schedule E.

In this situation, the only expenses you may deduct (on Schedule A) are mortgage interest and property taxes.

If your daughter and boyfriend are simply paying a portion of the household expenses, the "income" does not have to be reported on your tax return.

Carl11_2

Employee

Is this merely a cost sharing arrangement? Or do you have a rental contract with the tenant(s)?

If the latter, then it sounds to be like you rent out a part of your primary residence. You would be required to report all rental income/expenses on SCH E as a part of your personal 1040 tax return.

When renting out a part of your residence, the fact the rent is lower than the mortgage payment is irrelevant. What is relevant is:

- Are you renting to a family member?

- Are you renting at the fair market rental value for the space being rented, when compared to other similar rentals in your locale?

When renting to family at below FMV, your deductible expenses are limited to the amount of rental income received, and carry overs are not allowed. You just lose those carry overs forever. So in the end, it's all a wash. That's why I ask if this is just merely a cost sharing arrangement with no formal rental contract.