@cm571 thank you for participating in our event.
It is not clear from the description, if you will start renting to your son in 2022.
I will proceed with the assumption, that you will start renting in 2023.
For 2022, this house will qualify as a second home on your tax return.
Following are the deductions and credits that you can take on second home for 2022:
- Mortgage interest not applicable here as you paid in cash
- Real estate taxes
- Energy tax credit for things like insulation upgrade if they qualify
Suggestions for when you start renting to your son who will be paying you monthly:
- Charge him the fair rental value
- Have him sign a lease agreement at the current interest rate
If you follow these guidelines, you will be able to claim the income you receive and take deductions for expenses incurred for real estate taxes, depreciation and maintenance. Also, keep a record of the upgrades you are doing to the house, you will be able to increase the cost of the house (for depreciation) with the amount paid for those upgrades as long as you did not use those to get a credit on the tax return.
A few helpful links with more information:
Energy Tax Credit: Which Home Improvements Qualify?
Buying a Second Home—Tax Tips for Homeowners
Renting house to a relative
