My wife and I helped our daughter purchase a condo. We put up 20% down payment and have been contributing towards 20% of the expenses. After the fact, I learned we should have a written Home Equity Agreement and that my daughter is supposed to be paying us 20% of the fair market rent which we would then use to pay our 20% share of the expenses. Seems silly, but the IRS requires a rent payment if we want to take any deductions on our 20% of ownership as an income rental property on Schedule E. To complicate things, my daughter rents out a room. Does she need to pay us 20% of this rental income, or can that be treated as her separate income and she would then depreciate her 80% of the property value?
Next question, what happens to our write deductions if we stop contributing towards 20% of the expenses at some time in the future?
