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04-16-2018 12:59 PM
I bought a home that I am renting out to my parents for about $1000 per month below fair market value. They pay rent on the home and I use the land that comes with it for personal use. The total rent collected is $2800 for 2017. The total days rented were 274. What is the best way to report this on my return?
04-16-2018 06:34 PM
Hello, tnafranklin, and welcome to the community.
According to page 16 of IRS Publication 527, when you are renting out property for less than fair market value (i.e. renting not with the intent of making a profit), rental income should go on Line 21 of Form 1040 (other income). Expenses associated with the rental, like mortgage interest and property tax would be reported as itemized deductions on Schedule A, line 23 (miscellaneous itemized deductions).
Since deductions on those lines have to be greater than 2% of your adjusted gross income, you will most likely end up with a slightly higher amount of tax than if you don't report it...but since it is income, it should show up on your return.
Hope that helps!