Are there any tax benefits for renting a home to your parents?

Renting the home to your parents, you can now take all of the common tax deductions and tax breaks associated with a rental property. Yes, you need to consider your income level and classification as an investor, but the benefits can be significant. Please see my article on this topic here: “Tax Strategies with a Rental Property”.

Can you rent your parent’s home back to them?

Now that you own the home, you can rent it back to your Parents and have a rental property on your tax return. Courts have said that landlords can reduce their fair-market rent by 20% when renting to relatives. That lower rent reflects the savings in maintenance and management costs (L.A. Bindseil, TC Memo 1983-411).

Is it better to buy a house or rent it to your parents?

However, some of you may have alternative goals and purchasing the home to rent back to your parents could be a wise strategy. With a simple transaction, your parents could gain immediate access to their home equity, stay in the home, and you’d pick up some generous new tax deductions. Here is a summary of a few other hidden benefits:

Can a parent claim rent as a gift?

Gift Rent to Mom and Dad. If your parents can’t afford rent, you can ‘claim’ fair market value rent and claim the amount they actually don’t pay as a gift from you to them. This year the gift exclusion not subject to gift tax is $14,000.

Can a parent convert a home to a rental?

You can convert the property to rental and claim all the expenses associated with that, as well as what your parents give you as rental income.

What are the rules for renting to a relative?

Avoid making gifts to help the relative avoid the fair-market rent. If you give a good-tenant-discount, use a reasonable discount such as 10 percent. If you follow these rules, you should be in the clear about claiming valuable tax deductions for the rental property. © 2016 CBS Interactive Inc.. All Rights Reserved.