For 2017 taxes (USA) I formally converted my first home to a rental by declaring income, establishing cost-basis for depreciation, etc. The tenant's lease is July/2017-July/2018.
Complicating things, the tenant is a friend of mine..
The tenant has never been particularly on-time submitting his rent payment. At first it was close to the first of the month, then it was the beginning of the second week, and by now it has drifted toward the end of the month. While he's consistently late, to his credit, so far he has paid for each month.
As an aside, I am not particularly keen on how the property has been kept. Most glaring is the impact of his smoking inside, including a cigarette stain I noticed on the bathroom vanity...which was nearly brand new when I moved out. To be fair, though, he's probably par for the course for renters at this price point ($500 a month).
Last month he suffered a health emergency and subsequently had to undergo major surgery. While I am concerned for him as a person, especially as my friend with worsening health, I can't help but simultaneously be concerned about how this may play out downstream and how it may affect me financially.
Financially, I suppose the medium-worse case scenario for me is this fellow will not be able to afford a month or two of rent. Does the IRS even allow me to let that slide, particularly with respect to the fair market rent IRS requires? If the IRS does allow me to mitigate the loss, what documentation should I be mindful to collect? Are there any other ramifications I may want to consider in advance so that I can remain ahead of them?