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Old 02-21-2012, 08:30 PM
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Providing Housing for my Adult Sons

I live in Ohio and own my home. I got married in July of 2011 and my two sons stayed in my home while I moved out. They have been paying the mortgage payment (no more) and I need to know if I have to claim these payments as income; and if I do, what form would I use? Also, can I still claim my mortgage interest and taxes?



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Old 02-22-2012, 06:40 AM
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“They have been paying the mortgage payment (no more) and I need to know if I have to claim these payments as income;”---->You still can deduct your mort interest payment. As long as your sons pay mort. interest on your home, chances are they do not qualify to claim a deduction on their income taxes. They must have an ownership interest in the home that you are paying interest on in order for it to qualify for the mortgage income tax deduction, according to the IRS. Unless your sons have an ownership interest in your parents' home, your sons cannot deduct the mortgage interest on their returns.
“ and if I do, what form would I use?”---> Generally, cash or the FMV of property you receive for the use of real estate is taxable to you as rental income. You can generally deduct expenses of renting property from your rental income. Income and expenses related to real estate rentals are usually reported on Form 1040, Schedule E.However, when you rent to your sons, you MUST charge the prevailing fair market rent. If you don't, you are not allowed to deduct any costs above and beyond the actual rents received. This kills the tax advantage of real estate investment. If you rent to your sons, you must be able to prove that you are charging something close to the prevailing rent for similar properties in the area. Copies of rental ads highlighting similar properties will usually prove that.
However, as long as you charge them rent lower than market rental rates, the IRS would consider this lower rent to be a gift. Unless you gave someone gifts valued at more than $13,000($26,000 for two sons in this case) in 2012, you are NOT subject to the gift tax and do NOT need to file Form 709 with the IRS.
“ Also, can I still claim my mortgage interest and taxes?”--->You can deduct your mort interest payment on Sch A line 10, r/e taxes paid on line 6.


Last edited by Wnhough : 02-22-2012 at 09:06 AM.


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