Rental Income - Less Than Fair Market Price

If you have a rental property that you rented for less than the fair market price, this would not be reported on Schedule E (Form 1040) Supplemental Income and Loss. Instead, the income is reported on Line 5 of Schedule 1 (Form 1040) Additional Income and Adjustments to Income and the expenses are reported on Schedule A (Form 1040) Itemized Deductions.

Per IRS Publication 527 Residential Rental Property, on page 16:

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.

To enter your not-for-profit residential rental income in TaxAct:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Other Income in the Federal Quick Q&A Topics menu to expand, then click Prizes, awards or other miscellaneous income.
  3. Continue with the interview process to enter all of the appropriate information.
  4. On the screen titled Miscellaneous - Amounts Received, Enter "Not-for-profit residential rental" for the Description and your rental income under the applicable taxpayer's/spouse's column, then click Continue.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.