Let’s take this one step at a time.
1. This is an income tax forum. The IRS doesn’t care where you live and doesn’t care what property you own. The mortgage lender might have a requirement that you live in the home that you are borrowing against. You might be in default of your mortgage if you do not live in the home but the mortgage is in your name. If the mortgage lender discovers that you are in technical default, they could require immediate repayment of the mortgage even if you haven’t missed a payment. This is some thing that you should review with your real estate attorney before you sign any documents.
2. It is perfectly acceptable under the tax law for you to own one home and not live in it, and to allow family to live in it without charging them rent. However, in the situation that you describe, there are a number of things that you can’t do.
2a. You can’t deduct the mortgage interest and property taxes on your tax return, and your parents can’t deduct the mortgage interest and property taxes on their return. To deduct the mortgage interest and property taxes, the taxpayer must be legally obligated and also be the person who actually pays the bills. You are legally obligated, but your parents are paying the bills, so neither one of you can deduct the interest and taxes.
2b. You can’t apply for the STAR property tax reduction in New York State, because you have to own the home and live in it as your main residence to qualify for that tax break.
3. The address that you use on your tax return should always be the address where you want to receive official mail from the IRS about your tax return. It does not have to be the address of a home you own or even the home you live in.
4. You pay state and city income tax based on where you actually live and work, regardless of the address of any properties you own. Presumably, you have been filing a New York State tax return and paying New York State and New York City tax because you live in an apartment there with your partner. That will not change just because you also own a house someplace else. What counts for New York state and city taxes is where do you live and work more than half the days of the year.
The reason we say “if you itemize“ is that 80% of taxpayers don’t have enough itemized deductions to beat the standard deduction. However in this case, even if you do itemize your tax deductions, you can’t deduct the mortgage interest and property taxes for the reasons I already described.
