Renting to family or friends can seem like a win-win, but it comes with potential IRS pitfalls that you need to navigate carefully.
To avoid tax issues, always charge fair market rent. Renting below market value can lead to lost deductions and unwanted tax consequences.
The IRS allows a small discount for family—up to 20%. However, experts recommend keeping it around 10% to stay on the safe side.
Maintain thorough records of rental agreements and payments. Clear documentation helps establish a professional relationship and protects you during audits.
Hiring a property management company can help you maintain boundaries and ensure compliance with tax regulations while managing your rental.