Family Opportunity Mortgage Tax Question

[julypilot96]

Hi, 

I took advantage of the Fannie Mae Family Opportunity Mortgage and bought my father a townhome with only 5% down but here is the situation and my questions:

Background:

1. I mortgaged everything in my name using the FOP program

2. My father gifted me the 5% down payment since it was going to be his house.

3. My father has made all mortgage payments from his own checking account and he claimed mortgage interest on his taxes. 

4. Father pays 100% all expenses

5. I added my father to the Deed since he pays all the bills and lives there.

Updated Situation:

1. My father has asked me if I would re-pay (buy out) him for all closing cost and then he will just pay me the exact amount of the mortgage which is less than the 2019 Gift amount that a parent can gift a child ($15K).

Questions:

1. If I decide to buy him out and he continues to live there and pay all bills, is this considered rental or second home?

3. I will start to claim mortgage interest on my taxes but is there anything else I'm missing?

Any help would be great!

Thanks!

J-

[halpalms]

it's a second home because your relative lives there without paying fair rental value......you can deduct the interest if you own the property.

[Carl]

1. It's rental income and you need to report it as such on SCH E as a part of your own tax return. Since you will be renting to family, if what you're being paid is less than FMRV then you will not be allowed to carry over losses. You just lose them forever.

3. You'll claim everything related to the rental on your taxes. Income, expenses, mortgage interest, insurance, depreciation, etc. etc. etc.

[halpalms]

when you have 0 days at fair rental value and the rest for personal use the income isn't reported on SCH E.....income is reported as other income and deductions are limited to casualty loss, mortgage interest, and property taxes and reported on SCH A.....

[Ros16]

I have a similar question and have used what was called the Family Opportunity Loan for both sets of parents (husbands parents and my widowed mother). I do collect some rent but far below fair market value. My tax accountant has always had us list both properties on Schedule E and we always have a loss that we carry over. 

To complicate matters, we just purchased a condo to move my mother into the same building as my sister using Family loan again, and plan to actually rent out her original condo. I really want to be able to write off the mortgage interest on this new more expensive unit.

Is using schedule E, as my tax guy does, correct? If not, how do I find someone who is more knowledgeable on this topic to help with my taxes next year?

[DaveF1006]

if you are charging your mother rent for the new condo, you can add it as a third rental that is reported on a Schedule E. You will then be able to claim expenses for this, which includes mortgage interest.

If you use Turbo Tax online next year, Turbo Tax has a team of live experts that will do your taxes for you.  It is a service called Turbo Tax Full Service and is available to Turbo Tax Online subscribers.

@Ros16