Seeking Tax Advice: Renting to Family Under Market Value

[Sy Pires]

My wife and I have owned our Multifamily for over 2 years and currently decided to rent to my Aunt for under market value. I was not a BP member before doing so and I've only recently (2 months) begun educating myself more on real estate investing and such.

(Side note: I'm aware of horror stories of renting to family and have taken all of those stories into consideration.)

I've read that if renting under fair market value, the tax deductions are no longer possible. 

Aside from repair/maintenance deductions, what other deductions are no longer possible? (Will mortgage interest no longer be deductible as well?)

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Rent Info:

We were last renting our unit for $1,050 and my wife was eager to get a friend/relative into our unit after our last tenants for piece of mind (I wish I stuck to my guns and refused). We are currently renting it out to my Aunt for $800 but she said she was willing to pay more ($900-1000).

However, I believe the fair market value of rent in our area has recently bumped up to $1,100-1,300 for a 2bd/1b at 900 sq ft. I plan on getting more accurate info from real estate agents in my area.

Is there a way I can get her rent slightly below fair market value and not lose the tax deductions? (Such as a "good-tenant discount" of sorts?)

Thanks

- Sy