Question about my taxes with my rental property.

[Account Closed]

Good day BP. I’ve got a question about how my accountant does my taxes in regards to my rental. So I rent a SFH to my mother in law for $1,200/month (which is about what the mortgage payment is). Fair market value would put rent at about $1,400, but she helps in other ways so I’m not worried about it. The problem I am having is, when I go to a potential lender for possible financing for the next house (I also flip houses), they “see” from my tax returns that I am taking a “loss” from my rental, and it keeps my income lower than I believe it should be (thus hurting me on the income side). With the rent and mortgage pretty much being a wash, how can work around this? I want as much income to show to help with getting approved, DTI, etc...but I also want to be able to deduct as much as I can for taxes. Any advice from the pros out there?

[Paul Allen]

On a side note: renting to a relative for less than fair market value (FMV) is defined by the IRS as personal use of the property and not renting at all. This would get all your rental property expense deductions disallowed, which would stink.

You're probably close enough between what you're charging and FMV to not draw attention to yourself, but I wouldn't advertise you're charging your m-i-l less than FMV.

Best of Luck with Your Real Estate Investments!