Have you ever thought about buying your parents house? 

If your parents are aging and have a lot of equity in their home, you can give them immediate access to all of that equity if you buy their home from them and rent it back to them.  Their mortgage is pretty small if they’ve been in the home forever, or they may not even have a mortgage payment.

And your parents income may be low enough to not even warrant taking an itemized deduction anymore for the mortgage interest, if there is any!

Keep these points in mind when pulling these tax tricks… uhm… wise investments:

1  Don’t rent to your parents if they’re slackers and they’ll stick you with the mortgage payment each month (they have to pay you rent, dang it!),

2  Your parents will no longer be able to itemize (more than likely) because they’ll be loosing the mortgage interest deduction,

3  Make sure you charge fair value for the monthly rent on the home,

4  Make sure your parents (if filing jointly) won’t incur more than a $500k gain on the sale of their personal home (or they’ll have to pay some taxes),

5  Make sure you pay fair value for the purchase of the home or the IRS might get suspicious and try to stick your folks with some gift tax,

6  You’ll now own rental property, and may have some great new tax deductions!  Keep track of your repairs, painting, new toilets, etc. on this new rental home so you can deduct these on your taxes.

Thanks, Jason M. Blumer

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that (i) any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code; (ii) any such tax advice is written in connection with the promotion or marketing of the matters addressed; and (iii) if you are not the original addressee of this communication, you should seek advice based on your particular circumstances from an independent advisor.

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