it's not qualified residential interest to the parents because they don't live there. per code section 163(h)(4)
(A)Qualified residence
(i)In general
The term “qualified residence” means—
(I)the principal residence (within the meaning of section 121) of the taxpayer, and
(II)1 other residence of the taxpayer which is selected by the taxpayer for purposes of this subsection for the taxable year and which is used by the taxpayer as a residence (within the meaning of section 280A(d)(1)).
but that leaves the possibility of it being deductible as investment interest since they are on the title. however, one might view it as a gift because it is not paid directly to the mortgage company. Who's to say definitively what the money is for without an agreement. One could argue that it's to pay for food and clothing and other costs. Unfortunately, some things in the Code are not clear cut and the only way to get a definitive answer is to request a Private Letter Ruling. But this would likely be cost prohibitive.
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as to rental
different rules apply depending on whether you're
renting at FMV or not.
