Similar situation for me: purchased a second home (condo) in Seattle. I’m allowing my daughter to occupy the unit as her primary home. Daughter pays 20-30% below FMV as 'cost sharing.' No lease, no rent agreement.
My first year, 2016, I plan to treat as a 'personal use second home’ and treat the income/expense activity as a 'not for profit rental' Form 1040 21/23 misc
I'm going to report cost-share/rent received as "not-for-profit rental income on Form 1040, line 21" and report other rental expenses--not to exceed rental income-- subject to the rules explained in chapter 1 of Pub. 535, as miscellaneous itemized deductions on Schedule A, line 23, using the tiered application of expenses (Cat 1: Interest, taxes Cat 2: Insurance Condo Fees Cat 3: etc...).
The loan for the property is for personal use. I’m not planning on actively renting the property now or in the near future. We do plan to retire in about six years and will then either A) Occupy the property as our primary home indefinitely or B) Occupy/declare the property as our primary home until we can sell it and buy another (bigger) property in the area. For this reason, I’m not keen on declaring the property a rental and taking depreciation etc… which we really can’t do currently based on the ‘personal use’ definition.
We do itemize and our (total) deductions will exceed 2% AGI. My only goal here is to mitigate the taxes on my daughter’s cost-share/rent monies received by claiming rental expenses. The condo fee is $300+ a month, so hopefully the tiered approach/ 2% AGI will still provide some valuable offset to the income.
Am I missing anything? Thoughts? Suggestions?
