Second home bought as a gift

[Annie2121]

We live in Texas but bought a mobile home in Louisiana for our mother in law... we are making payments on this at the moment. Is there a way to get a deduction (especially if we do stay there 1-2 months out of the year)?

[carolineb]

Hi Annie2121, 

If you can define your mother in law's house as your "second home," you may be able to deduct the interest that you pay on its mortgage from your taxable income. You'll need to ensure that the deed to the house is in your name before attempting to make this deduction. Here is a helpful link that addresses interest paid on a mobile home as a second home: Is mortgage interest on an RV or mobile home tax deductible? 

 

[Annie2121]

Okay... got it. Thank you!

She has insisted on making payments for the home, but then we would need to consider it a rental property is that correct? If we started to accept payments what would we need to do then?

[carolineb]

If you are accepting payments from your mother-in-law, then yes, you would consider the mobile home to be a rental. Rental income and expenses (including the mortgage interest) would need to be reported on a Schedule E on your individual return. However, there are certain requirements that must be met in order for you to avoid limitation of the amount of expenses that you can claim against the income you are receiving, especially since you are "renting" to a related party (unless your mother-in-law pays rent equivalent to the fair rental value for that area).

Here is a link to IRS Pub 527 with additional information regarding rental income: IRS Pub 527 

[Annie2121]

Thank you SOOOOO much!