If you just don't want to deal with it on your taxes anymore, then you will need to *GIVE* the property to your MIL. (An installment sale will NOT mean you will not continue to deal with the property on your taxes.) You need to seek the services of two professionals in your local jurisdiction - especially if your state taxes personal income.
- First, a real estate professional to ensure you properly handle the transfer, because what you are "in fact" doing is gifting the property to your MIL.
- Second, a tax attorney. Not a CPA and not an EA. But a "tax" "ATTORNEY*. You will be required to file IRS Form 709 - Gift Tax Return when you do the transfer. Now don't let the name of that form mislead you. You will *NOT* pay any taxes on your gift. But since your gift will without question exceed $15K, you are required by federal law to report it to the IRS.
As for how your state will treat it and weather or not your state will tax your gift, that's another matter that a tax attorney should be well versed on.
Also be aware that just because you may take your name off the property deed, that doesn't have anything to do with your legally enforceable liability to pay the mortgage. That does not, can not and will not remove you from the mortgage or your legal liability to pay it.
