I own a property which I rent to my daughter at fair market value. I was told to quitclaim the deed to her so she could file for homestead exemption and save on property taxes. Currently, I treat the home as a business and treat the rent as income while treating depreciation and repairs as expenses. Would I still be able to do this if I quitclaim the deed to her? Obviously I would still be paying the mortgage and taxes/insurance so I want to be able to deduct those.
If you don't own the property, you usually can't take any of those deductions. Most likely the mortgage company would require you to repay the ENTIRE mortgage if you no longer own the property. It may not even be legal to transfer the title without getting a mortgage release first.
First, the mortgage holder has to okay the quit claim action. the only way I've ever seen a lender okay this, is if you sell the property to a qualifying borrower who then has to sign documents making them liable for the loan. Basically, if your daughter would not qualify for a loan without you cosigning, that's not gonna happen.
But if it did happen and you quit claim the property to her, then you no longer have a legal obligation to the property (for property taxes) or to pay the mortgage. The fact you may be the one that pays the mortgage is irrelevant. You wouldn't have a legal obligation to do so. Therefore, you can't claim property taxes, mortgage interest or any other expenses associated with the property. So this would actually be over ten times more costly since you would have to claim the rental income if you were the one receiving it. Not one penny of that passive rental income would be tax deductible either.