I purchased a house for my father in 2002. The mortgage is in my name and he reimburses me for the mortgage payment and takes care of all other expenses and upkeep. We both consider it his home. He was later added the deed and I will transfer my interest to him when the mortgage is paid off. I have been reporting it as a rental property all of these years. With most of the payment now going to principle, it is now showing a profit each year even with depreciation. Can I convert this to second home and just report the taxes and interest as regular deductions or have him report taxes and interest and not report anything on my returns? The mortgage payments he sends me and in turn are paid to the lender are approximately 14k/yr.
In summary:
- I hold the mortgage
- He lives there as his primary residence
- He is on the deed (along with me)
- He covers all expenses (sends mortgage payment to me and I pay the lender)
My intention was to help him buy the home since he didn't have good credit but increasingly it is seeming this is going to result in a tax bill if treated as a rental even with depreciation. My preference would be to treat as a second home and not report it as a rental but I don't want to run afowl by not reporting the mortgage payments as income. Thank you @Carl for you very helpful response to a similar question. It seems I would be okay to treat as a second home and not report the mortgage reimbursement payments as income but thought I'd double check to make sure I am not missing anything.
Thanks!
