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criley1952
New Member

I pay all exp,and repairs for home in which I conduct business 1Room I am the live in caretaker for the home owner age (95). Can I deduct any of this expense ? ?

 
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Opus 17
Level 15

I pay all exp,and repairs for home in which I conduct business 1Room I am the live in caretaker for the home owner age (95). Can I deduct any of this expense ? ?

OK, you have several issues from easy to complicated.

1. Your father can be your dependent on your tax return if he has less than $4050 of taxable income, and if you provide more than half his total support.

2. Your son can be your dependent on your tax return if he has less than $4050 of taxable income, and if you provide more than half his total support; OR if he is disabled and  provides less than half of his own support.

For income tax purposes, disabled means unable to perform gainful work due to a condition that is permanent or will last at least one year.  This is not necessarily the same as being determined to be disabled for other purposes, but they do overlap.

There is a worksheet in publication 501 that can help you figure out the support question. https://www.irs.gov/forms-pubs/about-publication-501


3. If you own** the home, you can deduct mortgage interest and property taxes that you pay.  If you pay part of the expenses and your father pays part, you can deduct the share that you pay.

**Normally, owning means just that, you have to own the home.  If you are not on the deed, then you don't own the home.  However, there is a doctrine called constructive ownership, where under certain facts you can establish that you are the "owner" for practical purposes even if you aren't on the deed.  Typically, this means that you have to show that you live in the home, you pay the bills and accept responsibility for performing maintenance and keeping the house in good shape, and you have a legitimate ownership interest.  This might fit your case, if you are living in the home with your elderly parent, you are performing maintenance and generally accepting the responsibilities of a home owner rather than a tenant, and you expect to inherit the home when he dies.

There are several tax court cases on this issue -- it's not widely known but it is allowed, and it is determined on the facts of each case.

If you deduct the mortgage interest and property taxes that you pay, and you get audited, you may have to go to tax court to prove your case that you have a constructive ownership interest.  It is a bit of a risk and hassle but based on the court cases I have read, you would be on solid ground.

4. To deduct home office expenses, you also have to be the owner.  I have never seen the constructive ownership principle applied to the home office deduction, only to mortgage and property taxes. If you want to try and use the constructive ownership principle to deduct home office expenses, I would consult a tax advisor.

5. If your father plans for you to inherit the house anyway, it may be beneficial for him to give you the house now, or give you part of the house, by quit claim deed.  However, this can have future tax complications for your income tax if you sell the house later.  (Many of these tax consequences can be ignored if you plan to live in the house for at least 2 years after he dies.  If you think you might sell before 2 years, you have to be more careful.)

One way would be for your father to give you home but retain a "life estate"; this means he gives you the deed to the home but retains the right to live there as long as he wants until he dies.  This would give you the definite ability to deduct the mortgage interest, property taxes, and home office expenses, while retaining some protections for him, and also helping you out tax-wise whenever he passes away.

However, you have to be very careful if there is the possibility of your father going into long term care or needing Medicaid for any reason.  Generally you have to be "poor" to get Medicaid (that's an oversimplification but it works), and you have to spend down your accounts and liquidate your assets before you qualify for assistance. If the patient gives away their assets in order to make themselves poor for purposes of qualifying for assistance, the government can "claw back" part or all of those gifts going back 5 years.

So before you actually transfer ownership of the home, consult an Elder care law firm that specializes in estate planning and such things.  Do not under any circumstances have your father gift you all or part of the house without getting professional advice.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

View solution in original post

3 Replies
Opus 17
Level 15

I pay all exp,and repairs for home in which I conduct business 1Room I am the live in caretaker for the home owner age (95). Can I deduct any of this expense ? ?

Do you have any relationship with the owner? For example, are you a child or grandchild who will inherit the home when the owner dies?

Is your business the business of being a caretaker, or are you talking about an additional business besides being a caretaker for this person?
*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
criley1952
New Member

I pay all exp,and repairs for home in which I conduct business 1Room I am the live in caretaker for the home owner age (95). Can I deduct any of this expense ? ?

I am caring for my father in his home since June 2010, the home is left to me. My work is independent within the home which allows me to do both. Additionally I have my adult son here as he is unable to hold a job due to severe bipolar disorder. I can provide documentation  for his illness.
Opus 17
Level 15

I pay all exp,and repairs for home in which I conduct business 1Room I am the live in caretaker for the home owner age (95). Can I deduct any of this expense ? ?

OK, you have several issues from easy to complicated.

1. Your father can be your dependent on your tax return if he has less than $4050 of taxable income, and if you provide more than half his total support.

2. Your son can be your dependent on your tax return if he has less than $4050 of taxable income, and if you provide more than half his total support; OR if he is disabled and  provides less than half of his own support.

For income tax purposes, disabled means unable to perform gainful work due to a condition that is permanent or will last at least one year.  This is not necessarily the same as being determined to be disabled for other purposes, but they do overlap.

There is a worksheet in publication 501 that can help you figure out the support question. https://www.irs.gov/forms-pubs/about-publication-501


3. If you own** the home, you can deduct mortgage interest and property taxes that you pay.  If you pay part of the expenses and your father pays part, you can deduct the share that you pay.

**Normally, owning means just that, you have to own the home.  If you are not on the deed, then you don't own the home.  However, there is a doctrine called constructive ownership, where under certain facts you can establish that you are the "owner" for practical purposes even if you aren't on the deed.  Typically, this means that you have to show that you live in the home, you pay the bills and accept responsibility for performing maintenance and keeping the house in good shape, and you have a legitimate ownership interest.  This might fit your case, if you are living in the home with your elderly parent, you are performing maintenance and generally accepting the responsibilities of a home owner rather than a tenant, and you expect to inherit the home when he dies.

There are several tax court cases on this issue -- it's not widely known but it is allowed, and it is determined on the facts of each case.

If you deduct the mortgage interest and property taxes that you pay, and you get audited, you may have to go to tax court to prove your case that you have a constructive ownership interest.  It is a bit of a risk and hassle but based on the court cases I have read, you would be on solid ground.

4. To deduct home office expenses, you also have to be the owner.  I have never seen the constructive ownership principle applied to the home office deduction, only to mortgage and property taxes. If you want to try and use the constructive ownership principle to deduct home office expenses, I would consult a tax advisor.

5. If your father plans for you to inherit the house anyway, it may be beneficial for him to give you the house now, or give you part of the house, by quit claim deed.  However, this can have future tax complications for your income tax if you sell the house later.  (Many of these tax consequences can be ignored if you plan to live in the house for at least 2 years after he dies.  If you think you might sell before 2 years, you have to be more careful.)

One way would be for your father to give you home but retain a "life estate"; this means he gives you the deed to the home but retains the right to live there as long as he wants until he dies.  This would give you the definite ability to deduct the mortgage interest, property taxes, and home office expenses, while retaining some protections for him, and also helping you out tax-wise whenever he passes away.

However, you have to be very careful if there is the possibility of your father going into long term care or needing Medicaid for any reason.  Generally you have to be "poor" to get Medicaid (that's an oversimplification but it works), and you have to spend down your accounts and liquidate your assets before you qualify for assistance. If the patient gives away their assets in order to make themselves poor for purposes of qualifying for assistance, the government can "claw back" part or all of those gifts going back 5 years.

So before you actually transfer ownership of the home, consult an Elder care law firm that specializes in estate planning and such things.  Do not under any circumstances have your father gift you all or part of the house without getting professional advice.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
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