What happens when I rent to a relative?
If your tenant is related to you, however, special rules and limitations may apply. (For these purposes “related” means spouse, child or grandchild, parent or grandparent, and siblings.) Here's the tax picture: If you rent a home to a relative who (1) uses it as his or her principal residence (that is, not just as a second or vacation home) for the year, and (2) it's rented at a fair rental (not at a discount), then no limitations apply. You can deduct all the normal rental expenses, even if they result in a rental loss for the year. (If you [...]