Renting to Family and Friends: Handle with Care

February 17, 2026

Tax Tip:

Ordinarily, you can deduct the expenses of owning and operating a rental property. You may even be able to claim a loss if those expenses exceed your rental income (subject to certain limitations).

However, suppose you rent a property to a family member or friend for less than fair market rent. In that case, the IRS will consider the property a personal residence rather than a rental one. As a result, you’ll still have to report the rental income on your tax return, but you’ll lose many of the deductions associated with rental properties. On the bright side, depending on the circumstances, you may still be able to deduct some or all of your mortgage interest and property taxes.

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This material is generic in nature. Before relying on the material in any important matter, users should note date of publication and carefully evaluate its accuracy, currency, completeness, and relevance for their purposes, and should obtain any appropriate professional advice relevant to their particular circumstances.

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