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Buying a condo for my dad w/mortgage

J

Jeraden

Platinum Member
My dad currently lives in another city and rents an apartment. He's getting kind of old and feeble and we want to move him back to my city so he'll be closer and we can look after him a bit better than he looks after himself. We'd like to get him a condo, just a fairly cheap 1 or 2 bedroom place. With his age and finances, I don't think he'd qualify for a mortgage on one. We were thinking of buying it for him and he'd just pay us a monthly rent for it.

I might not be searching the right terms, but I can't find any details on whether that would be considered a 2nd form of income for us. We're not doing it for profit or as a form of income. Anyone know if I'm going to have to go through complicated tax stuff in declaring the rent he pays us as income. It should net out to zero, but I just want to keep it simple.
 
It's not that complicated, but if he's paying you rent on it, save all the receipts for improvements you make to the condo - it's ALL tax deductible if it's for a rental property.

EDIT: and I'm not sure if it's considered income (I think it is, though) but the rent you get from him IS taxable.
 
Well to answer my own question, if anyone cares...

I'll have to report his rent payments as income on some tax form. I can offset the rent with actual expenses, including mortgage interest, real estate taxes, repairs, etc. The cost of the condo itself can be depreciated over 27.5 years. So it will create a minor tax increase for myself for the year, but we decided to just charge him extra so that it will cover that plus some extra for our effort. The plus is that we'll be getting equity in the condo for free basically since his rent will pay for pretty much all the related expenses. So when he passes on, we'll have a decent investment we can then turn around and sell or continue renting it.

We went ahead and bought one over the weekend. Well, our offer was accepted and everything, still have to do the official closing later in the month. Then we have to go pick up my dad and move his stuff down here. We're trying to talk him into just leaving all his old nasty furniture there and buying some new stuff.
 
why would you formally charge your dad "rent" when he could just help you out with some of your household "bills" and that wouldn't be income for you.
 
Rather than buying it outright, if you pay his mortgage every month you may be able to claim your dad as a depenedant. You would also be able to deduct the interest on the mortage.

Dave
 
Well, I could probably get away with not charging him rent. But as far as the law goes, thats not really legal. There's even a tax publication out there specifically about renting a home/condo/apartment to a family member. If I take in any money from him to help pay for the condo, its considered rental income. When I take out all the expenses, mortgage interest, depreciation, etc, then I'm not really going to be making all that much money, so the actual tax liability will be fairly low. At most I'll get taxed on like $100. I don't really want to chance it by doing it off the books.

I saw the thing about making him a dependent, but the problem is he still works and has income. He just works from home on the computer and never leaves the house. Which is part to blame for his poor health, he gets zero exercise and gets winded just from climbing a set of stairs.
 
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