topic Treating a child/dependent's home as personal rental property on taxes in Investors & landlords

Treating a child/dependent's home as personal rental property on taxes

jeffmacswan — Sat, 28 Sep 2019 13:45:57 GMT

So we're considering purchasing a house for our daughter who is in college and still a dependent. The home would be in her name and we'd be non-occupant cosigners on the loan. If she moves and we want to rent the home out, can we (parents) treat the home as a rental property even though we don't have ownership? Assume we pay handle all expenses and actively manage, collect rents as income, etc., and our daughter continues to have little or no income while in school. If this would work, are there disadvantages to doing it?

Re: Treating a child/dependent's home as personal rental property on taxes

Carl — Sat, 28 Sep 2019 14:16:47 GMT

If she moves and we want to rent the home out, can we (parents) treat the home as a rental property even though we don't have ownership?

No. You can't rent out that which *you* do not own. It would be like you trying to rent out a room in *my* house. Not gonna fly.

The home would be in her name and we'd be non-occupant cosigners on the loan.

I guess everyone has their reasons - but I can't figure it out. If you are buying the home with your money and putting your daughter's name on the deed, then it's a gift to your daughter. You'd need to file IRS Form 709 - Gift Tax Return since there's no doubt the gift is worth more than $15K.

Just purchase the house and keep everything in your (the parent's) name. Later down the road of time if you want, you can sell it or gift it to your daughter. But understand that once the transaction is closed, you can't make any changes to the property ownership without the permission of the mortgage lender.

Re: Treating a child/dependent's home as personal rental property on taxes

Critter — Sat, 28 Sep 2019 14:52:41 GMT

Actually there are alot of good reasons to put the home in the child's name ... some of which are :

1) the child may get a better rate on the mortgage interest since it will be owner occupied

2) the child would get the home owners reduction on the RE taxes

3) if the child lives there for 2 years the cap gain on the sale would be excluded

4) it builds good credit history for the child

Re: Treating a child/dependent's home as personal rental property on taxes

Carl — Sat, 28 Sep 2019 21:18:47 GMT

Sure there's good reasons for doing that. But for the non-owner to rent it out is not a good reason.