parents live in our second home

[jenren]

We bought the house across the street from us for my parents to live in as we don't have space to take them in with us.  They contribute some towards the mortgage and pay their own utilities, but we cover all the taxes, insurance, maintenance, and part of the mortgage payment as they can't afford even fair market rental.  The mortgage is in our name.  Parents are not listed as owners.  Do I have to report this as income?  Is it possible to consider this a "gift" to my parents as it falls below the gift threshold?  What is the proper way to handle this situation on our taxes?

[Mike9241]

this is a situation where the home is treated like a second home for yourselves. rental income is not reported. mortgage interest and taxes go on schedule A.

note that there may limited tax benefit since taxes on schedule A are limited to $10,000

and mortgage interest deduction may also be limited 

[TomD8]

I don't see any tax issue here.  You and your parents are just sharing expenses for your second home.  There's no income to report either for you or for them.   And there's no gift involved because you're just paying bills for a home that you own.

As @Mike9241 stated, if you itemize then you can deduct the mortgage interest and property taxes on your Schedule A, subject to the usual IRS limitations.